Market Overview

Check Out The Chart: An Unhealthy Biotech ETF?


Health care and biotech ETFs had been providing some noteworthy shelter from the various trials and tribulations faced by the market this year, but headwinds provided by the debt ceiling debate are proving that no ETF is immune from the tom foolery politicians engage in.

Such is life for the First Biotechnology Index Fund (NYSE: FBT), an often overlooked, but still quite large biotech ETF. FBT recently turned five years old and with over $626 million in assets under management, the fund has obviously proven popular with investors.

A cooperative market environment would make FBT an alluring proposition, but recent market action has proven to be anything but inviting for riskier fare and biotech certainly falls under the purview of “risky.” The ETF had been on a tear from late last year through May, gaining nearly 33%, but after a flirtation with $46, things have gone south.

In recent weeks, FBT has proceeded to make two lower highs and two lower lows. Never a good sign, and the ETF is now flirting with support at $40. The 200-day moving average appears just below that figure and if that can't function as firmer support in the event of a deeper market pullback, the $36-$38 area cold be the next destination for FBT.

Again, this is an ETF that is tempting to like. Home to 20 stocks, the weights of each holding range from 4.58% to 5.66%, so this is nearly equal-weight at work. FBT also does a good job of mixing familiar large-cap biotechs such as Amgen (Nasdaq: AMGN) and Biogen (Nasdaq: BIIB) with some small-cap names.

And hey, FBT gets a five-star rating from Morningstar. Those attributes, while noteworthy, aren't an invitation to get involved right now. FBT's chart says prospective buyers can probably get a better entry point in a couple of weeks. Check it out.

Posted-In: Long Ideas News Sector ETFs Short Ideas Technicals Intraday Update Markets Trading Ideas


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