Top market technician says the biotech breakout is just getting started

Key Points
  • One technical analyst sees biotech stocks continuing to rally.
  • The XLV Health Care ETF that tracks the space is up only 7% on the year, making it the worst performing sector in the S&P 500.
VIDEO5:5905:59
Health-care's the worst-performing sector this year, but technician says biotech is about to break out

Health care has been left out in the cold amid this market rally.

The XLV Health Care ETF that tracks the space is up only 7% on the year, making it the worst performing sector in the S&P 500.

Despite these woes, however, there is hope in one piece of the health-care trade – biotech.

The S&P Biotech ETF is up nearly 23% through the first half of 2019, while the NASDAQ Biotech ETF is up 13% — almost double the broader health-care space. Cornerstone Macro's Carter Worth says the biotech breakout isn't over yet.

"Biotech has a bit of life to of late, and that is appealing to a general momentum player, which is what technicals are all about, in the end," Worth said Friday night on CNBC's "Options Action."

"The 150-day moving average is actually inflecting upward for the first time in about two-plus years," he said. That's an appealing setup to my eye, and I think it's a good place to be long in an otherwise languishing area of the market."

The XBI's 150-day moving average isn't the only technical indicator pointing to a biotech breakout, and after a disastrous end to 2018, Worth is finally seeing some clear signs that this current rally has some real legs.

"Within this period, this head-and-shoulders bottom, we had this well-defined neck line," Worth said, referring to biotech during the back half of 2018. Now, he sees that head-and-shoulders bottom as the first half of another formation that points to an even bigger bullish run.

"Ultimately, the thinking is, that this big cup-and-handle is resolved up and out. I like this," said Worth.

Both the XBI and IBB ETFs were trading slightly higher on Monday.