Biotech Bonanza: Breaking New Ground!

• Biotechnology sector finally recorded a 52-week high, lagging the broader market by 8-months
• Early stages of the rally, with multiple reasons to drive further highs in the months ahead.
• Key drivers appear to be improving.
• Exposure to the sector becomes important to outperform the broader market.

Biotechnology has started off the year on a strong note, and finally breached a level that presented stiff resistance in the past.

The Nasdaq Biotechnology Index, as represented by ETF (IBB), has been consolidating in a trading range for over a year. Past moves up were rebuffed at the 300 index level, while the index found support in the 250 area.

This time the Nasdaq Biotech Index has punched through a key resistance level, recording its first 52-week high of a market rally that ensued last August and gained momentum in November 2016.

Nasdaq Biotechnology Index as represented by IBB ~ Source: GraycellAdvisors.com

The key question now is whether biotechnology will retreat or can the sector build on its gains?

It is our belief that the sector will consolidate around its new 52-week high and thereafter add to its gains, particularly in the first-half!

In a Prudent Biotech article in November 2016, Biotech Bonanza - 5 Reasons for Biotech Stocks to Shine, it was noted that:

"The pendulum has swung in the other direction, in favor of biotechs, and Biotechnology is poised to become a leading sector heading into 2017."

The rest of the article can be read on Seeking Alpha.