Does the Biotech Rally Have Staying Power?

Medical DeviceOn a day where the S&P 500 is down but the iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB) is up, it pays to examine if the biotech recovery is for real or not.

Last month, Biogen’s quarterly earnings report blew away expectations. This week, we’ll see earnings results from a number of other key players in the biotech space, including Gilead, Edwards Lifesciences, Amgen, and Celgene. Those companies’ reports will shape the direction of IBB for at least the next few weeks, if not months.

From IBD:

The SPDR biotech exchange traded fund is mired 31% below the price that investors were willing to pay for it a year ago. But it has rebounded 11% in the past month, outpacing virtually all other segments of the U.S. stock market.

Jeffrey Loo, an equity analyst at S&P Global Market Intelligence, considers the biotechnology subindustry attractively priced after a sharp sell-off. That, coupled with Biogen’s solid report, may be behind the recent rally, he suggested.

And despite abysmal year-over-year and year-to-date performance, the IBB is still one of the top-performing sector ETFs over the past several years:


Image: IBD

Investors won’t have to wait much longer to see if the recent recovery in the sector has legs or not. By the end of this week, the IBB will either be embarking on its next leg higher, or potentially re-testing its 2016 lows.

IBB-2016-07-25

The IBB rose $1.69 (+0.60%) to $282.59 per share in afternoon trading Monday.

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