The biotechnology industry isn’t backing down, with ETFs like the Direxion Daily S&P Biotech Bull 3x Shares (LABU) gaining over 15% to start the new year. More strength could be ahead as the global economy continues to battle with the Covid-19 pandemic.
LABU seeks daily investment results of 300% of the daily performance of the S&P Biotechnology Select Industry Index (“index”). The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
The index is designed to measure the performance of the biotechnology sub-industry based on the Global Industry Classification Standards (“GICS”). Within the past year, LABU has risen over 100%.
On December 22 of last year, the fund hit a high of $129.27 and it looks to be testing that resistance level in the early going in 2021. A relative strength index (RSI) filter shows LABU is below overbought levels at 59.75.
The moving average convergence divergence (MACD) filter shows the exponential moving average (EMA) below the signal line. In other words, RSI and MACD are both flashing buy.
More Strength Ahead for Biotech?
2020 was the year of for biotech. But 2021 could be too.
“Last year, companies working on coronavirus vaccines led gains in biotech stocks,” writes Adria Cimino in The Motley Fool. “And this helped the industry outperform the overall market. The iShares Nasdaq Biotechnology ETF climbed 26% in 2020, while the S&P 500 advanced 16%.”
“In the new year, vaccine stocks may extend gains as clinical studies advance for some and revenue rolls in for others,” Cimino added. “Beyond that theme, I’m looking for companies that posted solid product sales growth last year — in spite of the coronavirus pandemic. If they weathered that storm, I’m confident they can truly thrive as the situation improves. Considering these elements, here are my top biotech stocks to buy in 2021.”
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