Reading Market Tea Leaves With a big Biotech ETF

The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), which tracks the Nasdaq Biotechnology Index, and rival biotechnology exchange traded funds, have recently been on the mend. Continued good fortune for this previously struggling set of ETFs could be telling regarding investors’ risk appetite heading into 2016’s latter stages.

IBB, the largest biotech ETF by assets, is heavily allocated to the largest biotech names. For example, Amgen (NasdaqGS: AMGN), Gilead Sciences (NasdaqGS: GILD) and Celgene (NasdaqGS: CELG) combine for about a quarter of IBB’s weight.

Investors who are closely watching the presidential race will want to keep an eye on Democratic nominee Hillary Clinton in the coming months. If Clinton makes her way to the Oval Office and implements more regulation on pharmaceutical drug pricing, biotech companies may underperform the broader market.

SEE MORE: BBP – An Outperforming Biotechnology ETF

That said, Republican nominee Donald Trump has also spoken out against high pharmaceuticals prices, indicating that investors need to assess whether or not biotech ETFs have put political concerns to rest before jumping into the group.

Investors should be mindful of IBB’s technical status.


“During the past 9 years, IBB has been inside rising channel, until it managed to break out in 2013 when it embarked on a 2-year rally. It peaked last July, when it came back down to test old channel resistance as new support at several different times,” according to