Despite a valiant bounce attempt over the past few days, biotech stocks have yet to right the ship. A number of bearish developments still plague the popular iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB).

For the otherwise uninitiated, IBB is the kingpin among biotech ETFs. Its average daily trading volume is north of 1.5 million shares, providing plenty of liquidity for prospective buyers. The activity in its options isn’t half bad either, making it a better alternative for derivative traders than any other biotech ETF.

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IBB counts the biggest players in the biotech space among its top holdings including Biogen Inc (NASDAQ:BIIB), Amgen, Inc. (NASDAQ:AMGN) and Celgene Corporation (NASDAQ:CELG).

The dominant price pattern driving IBB these days is the ominous-looking double top. The biotech fund has failed in its bid to climb above the $370 resistance zone twice now. What’s perhaps worse is the amount of selling pressure that has entered the stock following each bungled attempt.

The high-volume down days we’ve seen suggest institutional distribution and could weigh on IBB for weeks.

Last week’s selling frenzy took shares of IBB below the 50-day moving average for the first time since October, breaking a trendline in the process.

Major support looms at $332. So far its held, but should it fail in the coming days watch out below. This two-day bounce in IBB sets up an attractive bearish opportunity for those looking to profit from a potential breakdown in the fund.

Source: OptionsAnalytix

Here’s how to play it.

Play the Odds with IBB Bear Call Spreads

Sell the Jun $375/$380 bear call spread for 70 cents or better. The trade positions you to profit as long as IBB isn’t able to climb above the $375 level — which it shouldn’t if the double top continues to play out.

The reward is limited to the initial 70-cent credit. The risk is limited to the distance between strikes minus the net credit, or $4.30, and will be lost if IBB rallies above $380. To limit the loss, consider exiting it the fund rises above the $370 resistance level.

At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.

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