Market Overview

This Biotech ETF Could Be Ready To Party

This Biotech ETF Could Be Ready To Party

In what has been a trying year for biotechnology stocks and exchange-traded funds, traders and investors are likely tired of hearing about when this group is finally going to deliver some legitimate upside.

Although the popular triple-leveraged biotech ETF Direxion Daily S&P Biotech Bull 3X Shares (NYSE: LABU) lost 3.5 percent Thursday, its month-to-date gain is still over 10 percent. That is good enough to make LABU one of Direxion's best-performing leveraged bullish ETFs to this point in May.

LABU Stands Out

Previously beloved biotech ETFs have been beaten up this year. Benchmark funds, such as the SPDR S&P Biotech (ETF) (NYSE: XBI), the ETF LABU is the triple-leveraged answer to, lost more than 20 percent in the first quarter. For its part, LABU has lost nearly two-thirds of its value this year and was recently reverse split.

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Still, LABU is enticing in the near term.

“From a technical perspective, LABU is currently in a short term uptrend. The price action is trending higher with the 7-day moving average currently above the 20-day moving average. The RSI is currently at 58.49, above the generally accepted uptrend level of 50. A continuation in the short term could continue to support the current uptrend. The MACD is above the signal line and trending slightly above the zero line. A continual widening spread between MACD and the signal line we believe continues to support the current trend,” according to Direxion.

Volatility Looms, Of Course

Of course, traders that are familiar with biotech stocks and ETFs know about the group's penchant for volatility. Where this is going is imagine that volatility in the form of a leveraged ETF like LABU. LABU's 30-day realized is the third-highest among Direxion's leveraged bullish ETFs over the 30-day period ending May 25.

The only two of the issuer's leveraged bullish ETFs that were more volatile than LABU over that period were the Direxion Daily Gold Miners Bear 3X Shares (Direxion Shares Exchange Traded Fund Trust (NYSE: NUGT)) and the Direxion Daily Junior Gold Miners Index Bull 3X Shares (Direxion Shares Exchange Traded Fund Trust (NYSE: JNUG)).

However, some traders just loving making bullish biotech bets and data confirm as much. For the days ending May 25, LABU averaged daily inflow of over $1.5 million, according to Direxion data.


Related Articles (XBI + LABU)

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