Chart of Day: SPDR S&P Biotech ETF (XBI)
The biotech sector has been under immense pressure.
But don’t write it off just yet.
Granted, the SPDR S&P Biotech ETF (XBI) dropped from about $105.47 to a recent low of about $92. The iShares NASDAQ Biotechnology ETF (IBB) slipped from about $150 to less than $132. Even ProShares Ultra NASDAQ Biotechnology (BIB) dropped from about $68 to a low of $52.
There were a couple of reasons for the decline.
One, markets saw a post-election fizzle. The Dow Jones Industrial Average slipped about 3% and is heading lower again. The S&P 500 dropped about 3%, as the NASDAQ fell by 4%. Two, the biotech sector slipped on fear and uncertainty of what effect Robert Kennedy Jr. being appointed as Head of Health and Human Services could have on the US FDA.
As noted by Reuters:
“Kennedy has been most vocal about the FDA, an agency that oversees nearly $3 trillion in medicines, food and tobacco products. In interviews and on social media, Kennedy has accused agency staff of doing the bidding of Big Pharma and Big Food. ‘FDA’s war on public health is about to end,” Kennedy wrote on X in late October. “If you work for the FDA and are part of this corrupt system, I have two messages for you: 1. Preserve your records, and 2. Pack your bags.’”
However, a good deal of the uncertainty and fear of his nomination has been priced in.
Plus, a lot of fear has become overblown. As noted by Wired.com:
“Kennedy wouldn’t have free rein though. Existing laws and regulations govern how the agency works, and a new FDA commissioner wouldn’t be able to get rid of those quickly. Likewise, even in a leadership role at HHS or the CDC, Kennedy wouldn’t be able to easily affect vaccine policy. Vaccine recommendations are made by the Advisory Committee on Immunization Practices, which comprises outside medical and public health experts.”
One way to trade the biotech sector overreaction is with the SPDR S&P Biotech ETF (XBI).
With an expense ratio of 0.35%, the ETF tracks the performance of the S&P Biotechnology Select Industry Index. Plus, it offers exposure to 140 stocks, including Gilead Sciences, United Therapeutics, Incyte Corp., and Exact Sciences to name a few.
Ian Cooper is an experienced trader who uses a combination of technical, fundamental, and news analysis to help individual investors grow their wealth. Ian’s Premium Options Strategies