With renewed talks from the POTUS regarding drug pricing, let’s review some charts for the biotech technology sector. Specifically, I am going to analyze the charts for the iShares NASDAQ Biotechnology ETF (IBB).

Are the talks coming out of the White House going to slow down any potential rebounds for the sector? Or are the charts looking to rebound regardless? Reviewing an ETF for the sector just might provide some clues. Off to the charts!

iShares NASDAQ Biotechnology ETF (IBB)

This first chart for the iShares Biotechnology ETF (IBB) is a 5 year monthly candlestick chart. It is a blank canvas – I do not have any illustrations on the chart. So why did I include the chart? Let’s review the discussion points I see.

Discussion Points:

• The MACD Histogram for the index has shown increasing buying momentum over the last 5 months
• Actual buying volume has been decreasing over that same 5 month time period which could be creating a [s2If !current_user_can(access_s2member_level1)]……

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Upside price targets for the index are calculated based on its bullish chart action.

If you are not a Trendy Stock Charts member, consider joining today! There are several different subscription plans available.[/s2If][s2If current_user_can(access_s2member_level1)]bearish divergence in the short-term

• If the IBB can break above $343.87 soon (its high during the month of December 2015), that should be confirmation of a re-test of the previous all-time high of $400.79

IBB – Higher Highs & Higher Lows

Back in November 2016 I wrote my last featured article for the IBB. That article was written approximately 2 weeks after the IBB index had its largest gap-up in its history. Something like an 8% gap-up. That article can be accessed here:

“11/24/2016 – iShares NASDAQ Biotechnology Index Fund (IBB)”

This next chart is a 3 year weekly candlestick chart for the iShares NASDAQ Biotechnology ETF (IBB). On the chart I illustrate where the index had its largest gap-up. I also point out a series of 2 higher highs and 2 higher lows, something that usually foretells an upcoming uptrend. But it must be 2 higher highs and 2 higher lows lows. If there is only 1 of either, a downtrend is usually the resulting chart action.

I also placed a blue colored Fibonacci Retracement Tool on the above chart. The IBB has now retraced 61.8% of the downtrend from its all-time highs in July 2015. While there may be a small consolidation period after reaching the 61.8% Retracement Line, a 100% retracement for the index looks very probable.

If the index breaks above the 61.8% Retracement Line (approximately the $339 price level), then purchase any subsequent pullback for the index of 5-8%. That would be the last decent opportunity to purchase shares of the index before it continues towards a 100% retracement.

IBB – Point & Figure Charts

The price objectives from both Point & Figure charts for the iShares NASDAQ Biotechnology ETF (IBB) look very bullish.

High/Low P&F Chart – $419 bullish price objective

Closing P&F Chart – $359 bullish price objective

The 2 bullish price targets seem to confirm my analysis for a continued uptrend for IBB. The High/Low P&F Chart even suggests that the index will break through its previous all-time highs up to the $419 price level. That is something that would have to be monitored as the index approaches the $00 price level.

Notice that the higher price objective of $419 is from the High/Low P&F Chart. That is the P&F Chart that uses the intra-day highs and lows of the share price. The Closing P&F Chart uses only closing share prices to calculate its price objective.

Because of this, the High/Low P&F Chart will usually produce a similar or higher price objective than the Closing P&F Chart. But because the $419 price objective is based on intra-day stock prices, it could mean there will be only a very short window of time to try and sell shares around the $419 price level.

IBB – Calculate Price Objectives

This last chart for the iShares NASDAQ Biotechnology ETF (IBB) is the same 3 year weekly chart from above. Two different Fibonacci Extension Tools have been placed on the chart to calculate some upside price objectives.

The Golden Ratio (the 161.8% Target Line) has been reached for the black Fibonacci Extension Tool. A consolidation period followed. The index appears to now be advancing towards the Golden Ratio for the green Fibonacci Extension Tool.

Reaching the 161.8% Target Line from the green Fibonacci Extension Tool would place the IBB right under its previous all-time high. On the long side, I anticipate reaching that target in approximately 6 months. The target price level could come quicker, but I don’t like to be too aggressive with the time frames. I instead like to be pleasantly surprised when it happens quicker.

Anchor Point #1 – The anchor point is placed at the very bottom of the downtrend or beginning of the new uptrend; I guess it depends if you are a glass half-full or a glass half-empty kind of person

Anchor Point #2 – This anchor point is placed at the very top of the 2nd “higher high” that was discussed above

Anchor Point #3 – The last anchor point gets placed at the low of the pullback that takes place after the 2nd “higher high”

iShares NASDAQ Biotechnology ETF (IBB) Summary

The charts for the iShares NASDAQ Biotechnology ETF (IBB) seem to confirm a continued uptrend. The expected uptrend should continue towards its previous all-time high, where I would anticipate some major resistance. Especially if the index continues to see a decrease in buying volume. When the iShares NASDAQ Biotechnology ETF (IBB) starts to get close to its $400.79 all-time high, it will be extremely important to re-analyze any biotechnology stock that is in your portfolio.

From the current price level of $338.12, that still leaves an approximate 20% to the upside, so there is some time on our side. Some individual biotech stocks may move more, some less, creating the approximate 20% increase for the index. But consider setting an alert and requesting an update on any biotech stock you may have when the index is approaching its previous all-time high.

A consolidation period is usually the case for most stocks and indices when they approach a previous all-time high. Maybe that is the time when the POTUS will pass some legislation regarding drug pricing that has been talked about. Regardless of possible legislation though, a re-test of all-time highs is at the very minimum a trading opportunity. Selling shares near a previous high is usually a great strategy. If you do sell shares near a previous high (for this index or any other stock) you would then look to usually repurchase the shares on a 10% pullback from the high. That is the “typical approach”.

Good luck trading and set an alert for the IBB near its previous high. Request an update on your biotech stocks at any point leading up to the previous highs for the IBB. It is best to be prepared than in the dark.

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