Trade of the Day: Buy $IBB for a Double-Digit Run Into Year End

iShares NASDAQ Biotechnology Index (ETF) (IBB) — This ETF tracks the NASDAQ Biotechnology Index, investing 90% of its assets in stocks of the index and the remainder in futures, options and swap contracts of those securities.

The top 10 holdings in IBB are Celgene Corporation (CELG), Amgen, Inc. (AMGN), Gilead Sciences, Inc. (GILD), Regeneron Pharmaceuticals Inc (REGN), Biogen Inc (BIIB), Alexion Pharmaceuticals, Inc. (ALXN), Vertex Pharmaceuticals Incorporated (VRTX), Illumina, Inc. (ILMN), Incyte Corporation (INCY) and BioMarin Pharmaceutical Inc. (BMRN).

Biotech has been one of the most successful sectors of the past few years, outperforming the broader market by a wide margin. In the past year, IBB is up 34% while the S&P 500 is down 0.3%.

IBB completed a head-and-shoulders intermediate top when it fell from a closing high at $398 and crossed under the neckline at $360. Following the breakdown, it achieved the pattern’s downside target of $322 in just three trading sessions, falling to a low of $284.16 before staging a dramatic reversal.

IBB is currently consolidating in an ascending wedge pattern after slicing through the 200-day moving average at $346, which is now the near-term support line. MACD has issued a strong buy signal.

Since the overall formation is bullish, try to buy IBB under $350 with a trading target of $400 for a gain of 14% in 60 days. IBB is also a good investment for buyers with a longer time horizon since the biotechnology sector is traditionally a strong performer and the recent correction provides an excellent entry point.