Are Biotechnology ETFs In the Midst of a Comeback?

Biotech ETFs: simple moving averages

The following chart compares IBB and XBI using their respective price levels, 50-day simple moving averages (SMA), and 200-day SMAs. These moving averages are common technical indicators used to assess the direction of a trend. The 50-day SMA reflects the medium-term trend, while the 200-day SMA captures the longer-term picture.

For IBB, the story looks relatively strong. As of August 19, it’s trading at $138.11, well above both its 50-day SMA ($130.88) and 200-day SMA ($131.89). More importantly, the 50-day recently crossed above the 200-day, a technical pattern known as a golden cross, which is typically viewed as a bullish signal. That tells us the medium-term trend has caught up with and overtaken the long-term trend, and often confirms a shift into an uptrend.

XBI, on the other hand, is showing some recovery but hasn’t confirmed the same trend reversal. It’s currently trading at $88.89, just slightly above both its 50-day ($85.71) and 200-day ($87.50) SMAs. Unlike IBB, the 50-day is still below the 200-day, so no golden cross yet. The narrowing gap between the two does suggest momentum is improving, but the trend remains unconfirmed.

For me, this technical setup suggests that larger-cap, commercialized biotech names, which dominate IBB due to its market-cap weighting, are leading the rebound. Smaller and mid-cap clinical-stage biotechs, which make up a greater share of XBI’s equal-weight strategy, continue to lag.

Biotech ETFs: relative strength index (RSI)

RSI is a momentum oscillator that measures the speed and magnitude of recent price changes to evaluate overbought or oversold conditions. It’s expressed as a value between 0 and 100.

Traditionally, an RSI above 70 signals that an asset might be overbought and due for a pullback, while an RSI below 30 suggests the asset may be oversold and potentially primed for a rebound.

The formula for RSI is RSI = 100 – [100 / (1 + RS)], where RS is the average gain during up periods divided by the average loss during down periods, typically measured over a 14-day window.

Looking at this next chart, both IBB and XBI show RSI values currently above 64, which implies moderately strong bullish momentum. Neither has crossed above 70 yet, so technically, neither ETF is in overbought territory. But they’re close.

Throughout 2025, both ETFs showed periods of weak momentum (March and April stand out), with RSI levels dipping close to or below 30. Since then, the RSI trend for both has been steadily climbing, and recent price moves have pushed RSI near the higher end of the neutral range.

Given how close both ETFs are to the overbought threshold, much of the easy money may already be in. This doesn’t necessarily mean a pullback is imminent, but it does mean any fresh entries at this point may face short-term resistance.

Please note that this article reflects the author’s personal views and does not represent the opinions of the publication or its affiliates. It is for informational purposes only and does not constitute investment advice. It is essential to seek guidance from a registered financial professional before making any investment decisions.