Biotechnology is one of those sectors that is totally out of grace after it came down sharply in the second half of 2015, as market volatility rose sharply.

The first chart shows that the biotech index (represented by the IBB ETF) lost 40% of its value in just 7 months. Talking about a sharp correction! That could sound amazing but the more important conclusion is that the long term uptrend was not violated, as seen on the chart.

Interestingly, the biotech index is forming a huge triangle formation, with support at 250 and resistance at 300. On the daily chart, we see a declining trend channel, with the same resistance line as observed on the weekly, in particular, at 300 points, which is 10% above today's closing price.

In other words, the biotech sector could have been trashed by many because of negative sentiment, but it is still too early to become pessimistic (or excited). There simply is no trend at this point, so more evidence is required, preferably in the form of a breakout or breakdown.

We picked out two amazingly interesting companies in the sector.

First, Amgen (AMGN) is in the process of a huge breakout! Watch a retest of the resistance line, after it broke out, for a confirmed buy signal.

A smaller company, Boston Scientific Corp (BSX), with a market cap of $26B,  just rose to all-time highs today. Its chart pattern looks extremely strong, and it is certainly a buy as this is the third attempt to break through 14 month resistance.

CONCLUSION:

Biotech is not as bad as many believe you to be. Some companies are doing truly great. Stock picking is mandatory in this stage, until the biotech index shows a confirmed breakout, at which point “higher risk plays” in the sector will be justified.