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Biotech ETFS Break Out With large Volume

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Highlights:

  1. Biotech ETFs broke out today with strong volume
  2. Biotech etf  5 average return above 50 percent
  3. Volatility is high for these etf.Investors and stock trader should consider their risk tolerance before investing in ETF.

Biotech etfs performance

Data Source: Yahoo finance

Biotech  ETF’s were making  W pattern base as other indexes and ETFs were moving higher .  Recently as S&P 500 index and Dow Jones index are  started to show weakness or  seemed to move sideways, Biotech ETFs  were showing different signs. Biotech ETFs  are showing strength in the market weakness and was holding in the above the neckline when market was selling off. This was a signal that biotech will breakout at any day.

Today biotech etfs broke out with large volume as market showing bullish to the upside.  There is a several biotech etfs in the market. Among them some are reliable and indicative of biotech sector movement.

 

IBB ETF:

Ibb  ETF is up 5.92 % today with volume 4 million. This is the  largest volume of the year after January 28 2016.  Volume is almost double than the 5o day break out. Big volume in the break out is a confirmation signal for the ETF that this is legit break out and institutional investors are interested in the ETF. IBB last 5 years return was 50 percent whereas Dow jones index and s&P 500 return  were 8.92 % and 11 % consecutively.

Ibb ETF Chart
Ibb ETF Chart

From the chart, IBB ETF came dow from 338 to 240 from January 1st to February 9 2016. During this time Index lost 29 % of its value. As market moved with V shaped pattern, IBB was making base and made a beautiful   W pattern at the bottom. After s&P 500 hits its recent high IBB started to show its weakness when market indexes and other ETFs were showing weakness in the market. S&P 500 and Dow jones index was down in Monday and Tues day, but etf managed to stay above its neck line and remained positive. Another important point is April 5 2016, Finviz data showed that all the key sectors in the stock markets closed red but IBB remain positive signals  etfs is ready  for breakout.

ETF 3 years and 5 years average return are 50 percent and if this breakout works correctly that would be great buy time for ETF. Because ETF still needs to be 23 percent up to overcome its yearly loss and catch up with other indexes in the market.  However if market makes new high and IBB regains its all loss of 2015, ETF needs to move above $ 400 and return to etf would be 50 %. This is not impossible as ETF average 3 years and 5 years return are 50 %.

 

XBI ETF:

XBI is S&P 500 biotech etf that broke today. Etf is up more than 7.1  % and has the 2nd largest volume in the year.  XBI ETF also made   double bottom like IBB and showed its strength as market was showing weakness last 2 days. XBI etf has 49 percent yearly return whereas s&P 500 return is merely 11 percent last 5 years.

XBI ETF Chart

ETF is down from January 2016 to February 2016 is 35 % and price came down from $70 to$ 45. Right now stock trades at$ 57 and if it comes back to yearly high, etf still needs to move up 22 percent. XBI will need move up to 1oo % to regain its previous high from its recent bottom of $45.  Chart shows that after etf made its double bottom pattern, etf was moving around the neckline and higher band of Bollinger .  Today ETF Gapped to the upside and get support from buyers and institutional investors.  ETF huge volume with gap up is a classical break out pattern and signals etf will move forward if market uptrend continues.

 

BIB ETF:

BIB is another biotech etf that broke today with huge volume. BIB etf is up 10  % today- that is more than Dow jones index yearly return. This etf has huge upside to move but little more volatile ETF . Stock trader and investor who love volatility and know how to use the volatility in their favor , this is really good etf to watch  and may be a  good buy  for the portfolio. BIB  5 year return is 170% and 3 year retrun is  131 %.

BIB ETF Chart
BIB ETF Chart

BIB chart shows that etf came down from $71  to $ 35 from January to February 9. Etf lost  more than 50 % of its value during this time. Now ETF is $49 range and etf needs to move at least 40 % to cover its yearly loss.  Chart shows that  BIB started to make bottom  at the February and made double bottom pattern at within march 2016. ETF also showed strength as market showed weakness in the last 2 days and was closed above the neckline of the chart. ETF needs to move  more than 100 percent to regain  its 2015 loss and this is also a long run potential move for the ETF.

 

Bottom line: These 3 Biotech etfs broke out today with strong volume and strong close. With some risk tolerance, these 3 ETF  can be a good booster for the portfolio return. However, since volatility is  high on these etfs, Investors should think how much risk tolerance they before invest in the ETFS.

 

Disclosure: This article is for educational purposes only. This is not a stock buying recommendation for investors or traders.