The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), which tracks the Nasdaq Biotechnology Index, and rival biotechnology exchange traded funds have been hampered by presidential politics this year.
IBB and rivals such as the SPDR S&P Biotech ETF (NYSEArca: XBI) and the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT) are among the previously high-flying biotech ETFs that have been sapped by politicians, looking to earn voters favor in an election year, attacking high drug prices.
Related: Hit The Lab With These 17 Biotech ETFs
Rare are the occasions that biotechnology stocks and exchange traded funds are seen as offering value. In fact, the sector historically trades at multiples that are elevated relative to broader benchmarks, but in a year of struggles for biotechnology names, some analysts see value with some big-name biotech stocks.
Adding to the temptation of biotech ETFs, is the fact that funds like FBT are seen as having rebound potential by some technical analysts.
The NYSE ARCA Biotechnology Index “has been riding an Up trendline on its log scale chart. This Biotechnology sector trendline begins at the shock low in November 2008, and connects the lows in March 2009, November & December 2011 and February & June of this year. After the selloff in the sector over the past few weeks, the BTK finds itself once again testing this major post-2008 Up trendlin around the 3000 level,” according to See It Market.
FBT, the second-largest biotechnology ETF by assets behind IBB, tracks the NYSE ARCA Biotechnology Index.
SEE MORE: Resisting the Temptation of Biotech ETFs
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.
“Thus, while biotech has been a star sector for the better part of a decade, one might not want to be married to the sector given that its uptrend is hanging in the balance here. Because if these trendlines are in fact snapped, we assure you that it won’t be so fashionable to own biotech stocks anymore,” adds See It Market.
Active traders looking to bet against biotech stocks have options, including the Direxion Daily S&P Biotech Bear Shares (NYSEArca: LABD) takes the -3x or -300% daily performance of the biotech sector, ProShares UltraPro Short NASDAQ Biotechnology (NasdaqGM: ZBIO) tracks the -3x or -300% daily performance of the Nasdaq Biotechnology Index and ProShares Ultrashort Nasdaq Biotechnology (NasdaqGM: BIS) tracks the -2x or -200% daily performance of the biotech space.
For more information on the biotech sector, visit our biotechnology category.
iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB)
