Health care-related equity prices have rebounded sharply over the past few weeks with the broader market. Such as working in the health care, pharmaceuticals and diagnosis remains in short, a niche that has also been dominating the attention of active traders is the biotechnology. In this article, we will take a look at several maps of the sector as a whole and try to determine how the followers of the technical analysis will be positioning themselves over the weeks and months to come.
SPDR S&P Biotech ETF (XBI)
Traders who are looking to get an idea of where a market segment is in the head, often turn to popular exchange-traded products like the SPDR S&P Biotech ETF (XBI). As you can see on the chart below, the fund price has rebounded sharply off the March lows, and it has since moved back above the 200-day moving average.
This type of price action with the movement of back above all of the peaks earlier in the year 2020 suggest that the bulls are in control of the long-term momentum. The recent movement is also about to trigger a bullish crossover between the 50-day and 200-day moving averages, which could be a catalyst for even more buying pressure over the coming weeks.
Immunomedics, Inc. (JOU)
It can often be a daunting task to find biotech stocks to buy because most people are not familiar with the products or companies in this field. Some merchants may choose to analyze the top holdings of the fund as XBI, which leads to companies such as Immunomedics, Inc. (JOU).
As you can see on the chart below, the bulls have been in control of the momentum for most of the past year. The recent outbreak of the momentum has also triggered a bullish crossover between the 50-day and 200-day moving averages, which could be used by traders to mark the beginning of a major upward trend.
Exelixis, Inc. (EXEL)
Another top holding of the XBI ETF, which could find its way on the radar of active traders is Exelixis, Inc. (EXEL). As you can see below, the breakout above the 200-day moving average has triggered a bullish crossover between the 50-day and 200-day moving averages.
As discussed above, it is a buy signal which often marks the beginning of a major bullish trend, and it clearly shows that the bias in favour of the bulls. From a risk management perspective, traders will be more likely to set stop loss orders below the horizontal trendline near $22 or the 200-day moving average, near$ 19, depending on the risk tolerance and investment horizon.
The Bottom Line
Biotechnology is a niche of the market that has been capturing the attention of active traders in the last few weeks. While the sector is often synonymous with short-term volatility, the graph models discussed above suggest that the long-term trend is in favour of the bulls and could be the beginning of a movement on the rise.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.