Hopes of Moderna (MRNA) vaccine approval boosts biotechnology

Biotech exchange-traded funds (ETFs) rose sharply amid speculation that Moderna Inc.’s (MRNA) COVID-19 vaccine would soon receive full approval from the Food and Drug Administration (FDA) after the agency federal government has given rival Pfizer Inc. (PFE) double-dose a formal green light for those 16 and over.

Prior to yesterday’s approval, the vaccine developed by Pfizer and its German partner BioNTech SE (BNTX) had only received emergency clearance from the FDA to help bring the deadly virus under control. Moderna shares rose 7.6% after Pfizer’s clearance was announced as investors hoped Moderna’s vaccine would be the next to be officially verified by the FDA.

Below, we take a closer look at the two largest ETFs in the industry that hold Moderna and turn to the charts to explore possible trading opportunities.

SPDR S&P Biotech ETF (XBI)

With a massive asset base of over $ 7 billion, the SPDR S&P Biotech ETF (XBI) has an investment mandate to provide a return similar to the S&P Biotechnology Select Industry Index. The ETF owns 224,814 Moderna shares, which represents a portfolio allocation of 1.23%. It also owns 234,603 units, a weighting of 0.77%, in COVID-19 vaccine maker Novavax, Inc. (NVAX), which gained 8.71% on Monday. In terms of trading, nearly 5 million XBI shares are traded daily on a narrow average spread of 0.02% in order to minimize transaction costs. As of August 24, 2021, the XBI is reporting a modest 0.23%, but is trading down 9.26% year-to-date, underperforming the broader health sector by 24% over the course of the year. the same period.

More generally, the XBI share price appears to be carving out a double dip, with two swinging lows forming at the $ 120 level about three months apart. Meanwhile, yesterday’s rally saw the ETF cross a short-term trendline on increasing volume in a move that could lead to follow-up buying over the next few weeks. Those opening a long position here should think about increasing the key general resistance levels, $ 140 and $ 152.50, while setting a stop-loss order somewhere below Monday’s low of $ 123.65.

IShares Biotechnology ETFs (IBB)

The iShares Biotechnology ETF (IBB) aims to replicate the performance of the ICE Biotechnology index composed of US-listed stocks in the biotechnology sector. Moderna and BioNTech are among the top 10 holdings in the fund, with allocations of 9.73% and 4.58% respectively. The ETF is also offering exposure to Regeneron Pharmaceuticals, Inc. (REGN), the biotech giant behind the experimental COVID-19 treatment REGN-COV2, which former President Donald Trump received in October from l last year when he contracted the virus. On the trading side, an average daily dollar volume of $ 439.76 million and a spread of 3 cents makes the ETF suitable for short-term strategies. IBB controls nearly $ 11 billion in net assets and has gained 13.49% year-to-date, mainly due to Moderna’s nearly 300% parabolic gain year-to-date.

After hitting an all-time high earlier this month, IBB shares returned to the 50-day simple moving average (SMA) and an uptrend line where they subsequently found buy support during the last trading sessions. Those who buy at these levels should consider using a trailing stop to let the profits run as far as possible. You do this by placing a first stop below this week’s swing low of $ 164.27, lifting it below each higher low as the fund’s price rises.

Disclosure: The author had no position in the above titles at the time of publication.