Meet Big Brother Biotechnology

With so much news hitting the market on Friday, I decided to stick to the benign analysis of the final character of my Modern Family I presented on Facebook Live-Biotechnology-IBB!


(To read thoughts on the market and analysis, please refer to the ETF section). He is called the Family’s Big Brother although also known as Big Pharma. Why do I address him as Big Brother?

IBB has a hand in everything you do.

From headaches to depression to chronic pain to cures for most illnesses,yep, that’s IBB.

IBB is the most highly speculated and volatile sector. His parents (XRT IWM) and siblings (KRE SMH IYT) may be great at tracking the US economy yet IBB plays a big part as well with 97.17% of the ETFs holdings located in the United States. This year, with the extraordinary bull run in the market, IBB never even got close to making new highs.

Why not?

First off, on Friday IBB had a 3 to 1 split. That means that the shares prices were cut in thirds. That increases the number of outstanding shares available, but not the value of those shares. Secondly, we have seen lots of political footballing in this group.

As a result, issues like the opioid crisis, price gouging, Amazon’s discussions of competing by entering the generic drug market-all illustrate how much cash there is on the sidelines, especially in IBB. Does that mean the market is not as confident as the news will have you believe?

IBB has a huge basket of 160 stocks. The biggest holdings? Biogen, Amgen, Gilead, Celgene and Regeneron.

Given the opioid epidemic, let’s not forget the good stuff these drug companies do, like controlling bleeding in hemophiliacs, or helping folks with multiple sclerosis, diabetes, arthritis, the flu, leukemia and cancer.

And when something like the Zika Virus hits who you gonna call? Plaguebusters of course.

Technically, IBB is holding the key weekly moving averages and remains in a Bullish phase. On the daily chart, IBB is in a Warning phase. Perhaps the 3:1 split will encourage speculators to buy against the underlying support between $99 and $101.50.

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Disclosure: None.

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