Buy This ETF Before June Runs Out

The SPDR S&P Biotech ETF (XBI) snagged the placement of ‘top performer’

Managing Editor
Jun 16, 2023 at 12:00 PM
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Subscribers to Chart of the Week received this commentary on Sunday, June 11.

One of our favorite parts of rolling into a new month at Schaeffer’s is digging into seasonality and historic trends of stocks, sectors, and exchange traded funds (ETFs). Last week, we took a look at three travel stocks to avoid in June, but now we’re going to shift gears to ETFs. Schaeffer’s Senior Quantitative Analyst Rocky White pulled a list of 25 ETFs that tend to outperform June, during the past 10 years.

In table below you will notice that six of the 25 names are technology or media related. However, making up a much smaller dent are healthcare ETFs, though this did little to deter the SPDR S&P Biotech ETF (XBI) from snagging the title ‘top performer.’ Over the past decade, XBI has averaged a 5.6% return for the month of June, leaving eight out of 10 of these results positive. This pales in comparison to the nearest healthcare ETF on the list; Health Care Select Sector SPDR Fund (XLV), which averaged a gain of just 0.8%, with only 60% of its returns positive.

ETFSeasonalityCotw

While tables pulled for seasonality trends can be fun to look at, it may not be enough to trigger the ‘green light’ for bulls. A peak at XBI’s more recent chart performance and patterns may just give the final push. The 200-day moving average has been a key player for the biotech. Acting as both a throughline of support and resistance within the past six months, its recent floor could mean XBI has only just begun an extended climb. the moving average captured the ETF’s drop to $82.65, just a more than three-month peak.

Other trendlines have been at play, per the chart below. Stemming from XBI’s late-March lows, the blue uptrend line has created a clean mode of support. Even better, overhead the ETF just broke above a resistance level that connected February’s high to May and June’s lower highs. To put the cherry on top, the SPRDR S&P Biotech ETF has managed to steady itself above its year-to-date breakeven mark and is even eyeing a year-over-year gain of 20%.

Now looks like an affordable time to buy the ETF. Specifically, XBI’s Schaeffer's Volatility Index (SVI) of 29%, which ranks in the low 2nd percentile of its annual range. In other words, options traders are pricing in low volatility for the days and weeks ahead.

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