Three different biotech ETFs, three bearish signals with high confidence
The biotech sector has been trending lower for the last five months, but has seen a bit of a rally over the last few weeks as investors appear to be making a shift from growth stocks to value stocks. Because of this rotation, many stocks in the sector are in overbought territory, at least on the daily charts. When I ran my nightly scans on Thursday night, I found three different biotech ETFs on my bearish scan and then I found that all three had seen bearish signals generated by the Tickeron Trend Prediction Engine.
The iShares Nasdaq Biotechnology ETF (Nasdaq: IBB), the Direxion Daily S&P Biotech Bull 3x Shares (AMEX: LABU), and the SPDR S&P Biotech ETF (NYSE: XBI) are the three ETFs appearing on my bearish list.
Let’s look at each one individually. The IBB has been trending lower since early April and a downward sloped trend channel has formed in the last five months. The fund just hit the upper rail of the channel and that upper rail is in the same vicinity as the 50-day moving average.
The daily stochastic readings are in overbought territory and made a bearish crossover on September 19. The bearish signal from the Tickeron Trend Prediction Engine came on September 17. The signal shows a confidence level of 71% and it shows that 85% of past predictions on the IBB have been successful. The signal calls for a decline of at least 4% within the next month.
In addition to bearish signal from Tickeron, the technical analysis overview shows that the price moved below its 50-day Moving Average, which indicates a reversal from an uptrend to a downtrend. In 35 of 40 cases where IBB's price crossed below its 50-day Moving Average, its price fell further within the subsequent month. The odds of a continued downtrend are 88%.
Turning our attention to the leveraged LABU fund, we see that it peaked around the same time as the IBB. There trend line connecting the highs is cleaner than the upper rail of the channel on the IBB, but there isn’t a parallel lower rail that would form a channel.
Like we saw on the IBB chart, the daily stochastic readings for LABU are in overbought territory and made a bearish crossover on September 19. The Tickeron Trend Prediction Engine generated a bearish signal on September 17 as well. The signal for this ETF showed a confidence level of 80% while past predictions have been successful 97% of the time.
Additionally, the Tickeron Technical Analysis Overview shows that the higher Bollinger Band was broken. A price fall is expected as the ticker heads toward the middle band. In 37 of 38 cases where LABU's price broke its higher Bollinger Band, its price dropped further during the following month. The odds of a continued downtrend are 90%.
Finally, the chart for the XBI looks a little different from the other two ETFs. Yes, the fund peaked in April, but it has seen a trend channel form over the last three months and it just hit the upper rail of the channel this week. Like the IBB channel, the upper rail of the XBI channel is in close proximity to the 50-day moving average.
As we saw with the other two, the stochastic readings are in overbought territory and made a bearish crossover, and we have the bearish signal from Tickeron on September 17. The signal for the XBI showed a confidence level of 75% and past predictions were successful 90% of the time.
For the XBI, there were several other bearish factors on the technical analysis overview. First, the fund moved above its higher Bollinger Band on September 11, 2019. This price move signals that XBI may fall back below the higher band and head toward the middle band. In 39 of 43 cases where XBI's price broke its higher Bollinger Band, its price dropped further during the following month. The odds of a continued downtrend are 90%.
On September 12, the 50-day moving average crossed below its 200-day moving average and that indicates a sell signal, due to the trend repositioning lower. In 3 of 3 cases where XBI's 50-day moving average crossed below its 200-day moving average, its price fell further within the subsequent month. The odds of a continued downtrend are 90%.
And like we saw on the IBB, the XBI saw its price drop below the 50-day moving average, which indicates a reversal from an uptrend to a downtrend. In 36 of 42 cases where XBI's price crossed below its 50-day moving average, its price fell further within the subsequent month. The odds of a continued downtrend are 86%.
IBB sees MACD Histogram just turned negative
IBB saw its Moving Average Convergence Divergence Histogram (MACD) turn negative on February 26, 2025. This is a bearish signal that suggests the stock could decline going forward. Tickeron's A.I.dvisor looked at 47 instances where the indicator turned negative. In of the 47 cases the stock moved lower in the days that followed. This puts the odds of a downward move at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on March 18, 2025. You may want to consider selling the stock, shorting the stock, or exploring put options on IBB as a result. In of 93 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
IBB moved below its 50-day moving average on March 10, 2025 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for IBB crossed bearishly below the 50-day moving average on March 11, 2025. This indicates that the trend has shifted lower and could be considered a sell signal. In of 16 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where IBB declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for IBB entered a downward trend on March 31, 2025. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Bullish Trend Analysis
The RSI Indicator entered the oversold zone -- be on the watch for IBB's price rising or consolidating in the future. That's also the time to consider buying the stock or exploring call options.
The Stochastic Oscillator demonstrated that the ticker has stayed in the oversold zone for 2 days, which means it's wise to expect a price bounce in the near future.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where IBB advanced for three days, in of 338 cases, the price rose further within the following month. The odds of a continued upward trend are .
IBB may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
General Information
Category Health