Biotech Stocks Rally

Biotech stocks have been on a tear since the market’s October 2023 low. The rally is still in its early stages.

Strategic Investment Recommendation

In our Jan. 8 report, the Institutional View recommended its clients purchase the SPDR S&P Biotech exchange-traded fund (ticker: XBI) when shares were $94. (They closed on Wednesday at $101.53.) It’s the most representative biotech index fund because every stock is weighted equally—regardless of its market capitalization.

Strong Rebound in Biotechs

It’s important to remember that XBI had sunk 64% from its 2021 peak to its 2022 low. Biotechs had been out of favor for three years. But now their recent powerful price action is well supported by the technicals.

Technical Analysis Insights

The weekly price chart above shows that after collapsing from $174 to $62, XBI formed a two-year base. Within the base is a “double bottom,” with the recent October low within a few points of the 2022 low. Two subsequent bullish reversals—a higher low than the previous week, a higher high than the previous week, and a close above the previous week’s high—indicated strong buying demand.

Price Target Projection

A powerful 33% advance took XBI from a weekly close of $67 to its year-end $89 close—all in its initial sprint to the upside. After stagnating for seven weeks, XBI rocketed out of its two-year base. My technical work projects a $115-$120 price target for this rally.

Positive Volume Accumulation

The chart above illustrates the powerful accumulation in the group. Volume flows soared to record highs, even though XBI is well below its $174 price high.

Bright Outlook for 2024

My work projects that biotech will be one of the strongest groups in 2024.