The case for buying the biotech bounce

Two popular biotech exchange-traded funds have been on a tear lately, and some strategists see more upside ahead from both fundamental and technical perspectives.

The iShares Nasdaq Biotech ETF (IBB) and the SPDR S&P Biotech ETF (XBI) both just logged four consecutive weeks of gains. They have not posted such streaks since August 2016 and June 2016, respectively, at a time when biotech stocks were on a roller coaster, mired in political rhetoric in the heat of the campaign season.

However much political uncertainty surrounds biotech names — with the fate of Affordable Care Act now left to President Donald Trump's administration and the Republican-controlled Congress, biotech is attractive at current levels, said Max Wolff, market strategist at 55 Capital.

"I like the names. I think there's a sort of opportunity here," Wolff said Friday on CNBC's "Power Lunch."

"There's unusual dislocation and tumult in the future of health care, who's going to pay for what — markets don't seem to care about that now. That gives us a little short-term pause," Wolff said.

Longer term, however, he likes biotech given "the demographics of aging, the global market and it looks like this is an area that might be relatively less likely to be affected or slammed into by various Twitter policies or public politician-led discussions about drug prices."

Biotech stocks, particularly the XBI, look attractive on a technical level to Ari Wald, head of technical analysis at Oppenheimer

"I think you want to own the smaller to mid-cap stocks in the group, which are actually showing some more relative strength here," Wald said Friday on "Power Lunch," pointing to a chart of the XBI.

In a chart of the XBI, it appears to be breaking above its six-month "consolidation," Wald noted, all above a rising 200-day moving average.

"So for upside, we think XBI gets back to $80. That'll take the ETF more or less near where it started to break down back at peak levels around 2015, very strong setup here," he said.


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Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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