Buy the biotech bounce: Technician

Biotechnology stocks are on the mend.

The iShares Nasdaq Biotech ETF (IBB) has seen some relief from its selloff, in which the fund fell more than 6 percent over one month. In early trading Tuesday, the ETF was up slightly. Monday the stocks closed up more than 2 percent, prompting one technician to encourage investors to buy in.

"Over the last three years, we've had these kind of questionable periods where it's really tested the investor's resolve to come back," Craig Johnson, technical analyst at Piper Jaffray, said Monday on CNBC's "Trading Nation."

But investors keep coming back to buy the dip, Johnson said, which has kept biotech stocks in an upward trend since 2011. The IBB is up more than 22 percent year to date.

"This again looks to be one of these periods where you want to be buying these biotech stocks," he said.

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David Seaburg, head of sales trading at Cowen & Co., said the biotech sector still shows promise fundamentally for long-term gains. However, he sees investors shifting funds from biotech stocks to cheap energy stocks that have suffered a major blow this year.

"I think there's some headwinds here, but I don't necessarily see people stepping in to buy the dip like I've had in the past, and I absolutely see people really interested in and dying to buy energy," he said.

The S&P 500 energy sector has lost more than 13 percent this year, dragged down by the fall in oil and other commodities prices.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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