Biotech Surge: IBB Up 9 Percent in Three Days

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Biotech Continues to Roll

The broader equity market was weaker today, with the S&P 500 (SPY) down just slightly to 2,435, while the NASDAQ Composite (QQQ) was up about 75 bps to 6,233.95. Biotechs (IBB) were the stand out sector with the IBB up over 4 percent closing at $316.40. The IBB has added nearly 9 percent in the past three trading days alone and is now outperforming Tech (XLK) on the year.
IBB Chart

IBB data by YCharts

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Biotech Breakout- Finally!

Top 25

All of the top 25 stocks in the IBB were high today, with Exelixis Inc. (EXEL), Incyte Corp. (INCY), and Biomain Pharmaceuticals Inc. (BMRN) leading the way higher.

Biotech IBB Top 25 Performers

More Room To Run?

The IBB could have further room to run even from these levels, as it appears that the sector is just breaking out of a near year-long sideways consolidation. The first area of resistance for the ETF is around the $320 area, with $343 not far behind.

IBB Daily Chart

(Interactive Brokers TWS)

If the ETF travels to $343, it could represent upside of approximately another 8.5 percent.

What Does It Mean

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We have been waiting for this breakout to happen for the past few weeks and are glad to see it finally happen. It was the last piece need for the equity market to continue its march higher. The recent move higher in the sector demonstrates the risk-on mentality is still very active in the capital markets. The companies and the sectors that can offer the biggest upside growth potential are getting the premium valuations. The biotech sector is just another extension of this phase and is worth watching closely.

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Michael Kramer is the Founder and Portfolio Manager of Mott Capital Management LLC, a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.

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