[Chart of the Week] Biotechnology Stocks Break Out!

JC Parets
January 30, 2018

It's hard to ignore a sector that is breaking out to new highs, especially when it's something that it hasn't done in a long time. Biotechnology has been a laggard for years. If we've wanted to be in healthcare, it certainly has not been in Biotech or Pharma, it's been Medical Equipment stocks. But it's 2018 and times are changing.

Today we're looking at breakouts in both the Equally-weighted Biotechnology Fund $XBI and the Cap-weighted Biotechnology Fund $IBB. Because of the very different composition of the two sector funds, we want to make sure to always watch the behavior of both. The $XBI tells a better story of the sector because it is not dominated by the big names like Amgen or Gilead. But at the same time, we're not going to just throw out the fact that $AMZN is a huge component of the Discretionary space, for example. So I think it's important to always keep an eye on both the cap-weighted and equally-weighted sector indexes.

Our Chart of the Week shows both $XBI and $IBB breaking out to new highs, with the former equally-weighted index hitting new all-time highs:

I think the Cap-weighted Fund $IBB is a long if we're above 114.50 with a target up above 133 which were the highs in 2015:

Look at the Equal-weighted Biotech Fund $XBI breaking out to new all-time highs, already above 2015 resistance. This, to me, is evidence that Biotechs in general are something we want to be long here. We want to be long $XBI specifically if we're above 91 with a target above 120:

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Cheers,

JC

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