iShares NASDAQ Biotechnology Index (ETF) (IBB) — I last reviewed IBB on Dec. 22 at $310.50, and before that on Oct. 20 at just under $273. Since my December recommendation, IBB has advanced 17%.
IBB seeks to track the results of an index composed of biotech and pharmaceutical stocks listed on the Nasdaq. Morningstar rates it a five-star fund because of its extraordinary record of success and future potential. S&P Capital IQ has an “overweight” rating on IBB.
I regularly review the fund’s portfolio in order to cherry pick its holdings for solid technical recommendations. Currently, the largest holdings in IBB are Gilead Sciences, Inc. (GILD), Amgen, Inc. (AMGN), Biogen Inc (BIIB), Celgene Corporation (CELG), Regeneron Pharmaceuticals Inc (REGN), Mylan NV (MYL), Illumina, Inc. (ILMN), Vertex Pharmaceuticals Incorporated (VRTX), Alexion Pharmaceuticals, Inc. (ALXN) and BioMarin Pharmaceutical Inc. (BMRN).
However, at the moment, I think buying the entire package is a price-conscious decision with lower risk than purchasing a single biotech stock.
Following 2014’s outstanding performance, in which IBB jumped more than 30%, the ETF consolidated. The consolidation has taken the form of a bullish rectangle with support at a double-bottom at $340 and resistance at a triple-top at $370. Within the rectangle there are two support lines, the 50-day moving average at $356 and the intermediate trendline at just over $350.
Note the buy signal on Wednesday from my proprietary indicator, the Collins-Bollinger Reversal (CBR).
A break above $370 gives a trading target of $400, which is 10% above the current price. This undervalued ETF is also appropriate for long-term investors who desire portfolio representation in the biotechnology sector.
