Is Biotech Quietly Breaking Out?


Biotechnology stocks are trying to break out as investors await potential catalysts after Labor Day.

The iShares Nasdaq Biotech ETF (IBB) has closed at new 52-week highs in the last two sessions. It’s now pushing back to price areas last seen in the summer of 2015.

While several companies in the industry reported good numbers in last earnings season, the market seems to be looking forward to some other events in coming weeks:

  • September 4: B. Riley FBR Healthcare Investor Conference.
  • September 5-6: Citi 13th Annual Biotech Conference in Boston.
  • September 5-6: Wells Fargo Health Care Conference in Boston.
  • September 12-14: Morgan Stanley Global Healthcare Conference in New York.

We’re not experts on this space or able to list all the companies presenting, but plenty of information is available on line.

iShares Nasdaq Biotech ETF (IBB) with 50-day moving average and new highs marked.

Let’s view recent news for the top five holdings in IBB, which may help explain why sentiment has been improving:

  1. Biogen (BIIB): The biggest holding in IBB spiked higher on July 6 thanks to positive trials for its BAN2401 Alzheimer’s compound. It’s held its ground since.
  2. Gilead Sciences (GILD): Reported better-than-expected earnings and revenue on July 25.
  3. Amgen (AMGN): Beat estimates and raised guidance on July 26.
  4. Celgene (CELG): Beat estimates and raised guidance on July 26.
    (Both AMGN and CELG halted price increases, apparently in response to pressure from President Trump. Will that shield them from future criticism?)
  5. Illumina (ILMN): Crushed estimates and raised guidance on July 30.

Clients with longer-term memories may recall IBB enjoyed a major uptrend in the first half of the decade. It crashed in mid-2015 and started clawing its way about to life about a year ago.

In conclusion this isn’t a trade recommendation and everyone needs to do their own homework. But biotechnology stocks have had some good news and clients seem to be looking for more positives before the quarter ends.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.