Target This ETF for the Start of Summer

XBI boasts impressive gains from May to July, historically

Managing Editor
May 4, 2020 at 1:46 PM
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As summer inches closer, the classic mantra "sell in May and go away" is always worth revisiting. But instead of focusing on the stocks that struggle, we took a look at the best sectors to own during the summer months, as well as one stock in particular that is flashing a historically bullish signal. 

More specifically, per a study from Schaeffer's Senior Quantitative Analyst Rocky White, below are the the 15 best sector returns for exchange traded funds (ETFs) over the past 10 years, from the end of April through the end of July. 

Best Summer Sectors

As you can see, the SPDR S&P Biotech ETF (XBI) boasts an impressive average return of 8.6%, with eight out of 10 returns positive. That's nearly double the second-best return of the ETFs compiled on the list.

So among biotechs, which one would be a possible target? Look no further than Inovio Pharmaceuticals Inc (NASDAQ:INO). Per White, INO just came within one standard deviation of its 40-day moving average after a lengthy period above the trendline. The equity has pulled back to this trendline four other times in the past three years. One month later Inovio was higher all four times, and averaged a whopping gain of 77%.

From INO's current perch of $10.88, a similar burst could put the stock around the $19 level for the first time since March 9. Despite the shares' 19% pullback in the last seven days, Inovio is up 235% year-to-date, thanks to its role in developing a potential COVID-19 vaccine.

In the options pits, the stock's 10-day put/call volume ratio of 0.47 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 90th percentile of its annual range. This indicates that while calls have outpaced puts on an absolute basis, the rate of put buying relative to call buying has been greatly accelerated.

 

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