By Doug Busch

Biotech stocks are on a winning streak that might just continue through the rest of the year.

Last week, the SPDR S&P Biotech exchange-traded fund (ticker: XBI) surged 6%, contrasting with a 0.8% decline in the broader healthcare space, as measured by the Health Care Select Sector SPDR fund $(XLV)$. When the biotech sector shows signs of renewed strength, it often signals a broader risk-on sentiment among investors.

The biotech ETF, up 5% in 2025, is poised for its third consecutive annual percent gain in the single digits.

Could the sector be gearing up for a meaningful rally into year-end? We last discussed this possibility in July, and technical analysis of recent price action says yes. The monthly chart reveals a bullish breakout above a long-term bearish head and shoulders pattern. That breakout projects a push toward the very round $100 level near term, and a potential advance to $115 by the first quarter of 2026.

The SPDR S&P Biotech ETF traded at $94.22 Tuesday.

Within the sector, a few stocks stand out on a technical basis. Shares of Incyte, which specializes in oncology and autoimmune diseases, have shot up 25% this year, displaying excellent relative strength versus the XBI. The stock surged 25% during a four-week winning streak from late July to mid-August, forming a bull flag just 2% below its 52-week high.

A decisive breakout above $87 could fuel a measured move toward $104 by year-end. This recent run began after a double-bottom breakout above the $77.06 trigger on July 29, on its latest earnings reaction -- reinforcing the case for adding to winners as momentum builds.

Incyte traded at $86.05 Tuesday.

Crispr Therapeutics, a Swiss biotech up more than 40% this year, has pulled back 25% from late July's 52-week highs, presenting an attractive entry point.

The stock recently traded near $55, a key resistance level that has capped rallies in November and December 2024, and this past February. Bullish reversal candles, with a piercing line and doji, were recorded on Sept. 2 and 4, signaling a potential uptrend forming. Round number theory remains relevant, with $70 marking July's peak and $30 the April bottom. This setup suggests a buying opportunity near current levels, and that investors increase holdings above a double bottom trigger of $61.54, with $50 being used as a stop.

Crispr Therapeutics traded at $53.83 Tuesday.

Shares of Merus, a Dutch biotech focusing on cancer treatments, are outperforming with a robust 58% gain this year. The stock trades just 4% below its recent 52-week highs, while the XBI lags 11% off its peak.

The daily chart shows technically constructive patterns, starting with a powerful double bottom on May 23 that propelled a breakout surge of over 32%. A subsequent cup base breakout in mid-July set the stage for another bull flag pattern. That gave investors another chance to build up their positions as the stock rallied another 20% rally during the weeks ended July 18-25. Investors should consider entering on a breakout above the $68 pivot, targeting a potential move toward $83 by year-end.

Merus traded at $67.25 Tuesday.

Write to Doug Busch at douglas.busch@barrons.com

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September 09, 2025 14:22 ET (18:22 GMT)

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