Biotech is always a fascinating sector to watch. It can also be very volatile.
The SPDR S&P Biotech ETF ( XBI) has improved in recent weeks so a fresh check of the charts and indicators is in order. Let's do that now.
In this daily bar chart of the XBI, below, I can see a saucer bottom pattern since August. Prices have been edging higher towards a potential breakout around $95 -- the August highs. XBI trades above the rising 50-day moving average line and above the bottoming 200-day line.
The trading volume histogram is neutral but the On-Balance-Volume (OBV) line has been strong and has broken above its August peak. Sometimes the OBV line leads the price action.
The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but the two moving averages of the oscillator do not show us a big separation.
In the weekly Japanese candlestick chart of XBI, below, I can see an improved picture. Prices are trading above a slightly rising 40-week moving average line.
The weekly OBV line shows strength from May. The MACD oscillator is now edging above the zero line for an outright buy signal.
In this daily Point and Figure chart of XBI, below, I can see an upside price target of $102 but a trade at $96 is needed to refresh the uptrend.
In this weekly Point and Figure chart of XBI, below, I used a five-box reversal filter. Here the X's and O's yield a price target in the $117 area.
Bottom-line strategy: Traders who like to drill down into ETFs should watch shares of Arrowhead Pharmaceuticals ( ARWR) , which is currently a bigger weight in the XBI than other stocks. The charts of ARWR look ready for an upside move and that could be just the thing to move the XBI above $96.
