The iShares Nasdaq Biotechnology ETF (IBB) - Get Report played a strong leadership role in the first half of 2015, outperforming the S&P 500 index by 19% in the January-to-July period. It was not immune from the broad market onslaught in August, but it has been making a series of higher lows since October under horizontal resistance in the $342 area. This resistance level is also a 50% Fibonacci retracement of the July high and August low, positioned directly below a flat 200-day moving average. It is being tested again, and it could be time for a breakout and a potential resumption of its former leadership role.

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The vortex indicator at the top of the chart is designed to identify the start and direction of a new trend. A bullish crossover is underway and suggests that the recent price action that took the stock back up above the 50-day moving average and defined the horizontal resistance level is the beginning of a more extended move higher. Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator, and it is above its centerline on both timeframes. This is an indication of positive momentum on multiple timeframes.

One technical indication that will have to improve with a breakout is overall volume and the direction of money flow. The holiday week saw a drop-off in volume, but Chaikin money flow, a 21-period average of accumulation/distribution, has been tracking lower all month.

Biotechnology outperformed the broader market in the first half of 2015 and may be ready to outperform in the first half of 2016. The IBB is a long candidate after an upper candle close above horizontal resistance, using a trailing percentage stop under the 50-day moving average.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.