These three ETFs look ready for breakout moves, Roth MKM says

Roth MKM has spotted two exchange-traded funds – the iShares Biotechnology ETF (IBB) and the iShares Expanded Tech-Software Sector ETF (IGV) – that appear ripe for upside moves, while outpointing another fund at risk of heading lower.

The investment bank outlined its observations in a technical strategy note Sunday that also said market breadth remains a concern with the S&P 500 (SP500)(SPY)(VOO) heading into July, which tends to be the strongest month for stocks, averaging 2.3%, according to 20 years of data.

In the note, O’Hara said its equal weighted sector rankings show Health Care (XLV) is an underweight. “(Yet) there could be some potential upside momentum if biotech can break out,” he said.

The price of the iShares Biotechnology ETF (IBB) was sitting just under a major chart resistance at $140. “A break above that line will suggest a move to $160. This is not a high conviction call due to the lack of real breadth under the surface,” he said. The ETF traded above $137 on Monday.

Looking at software within the technology sector, Roth MKM charted a longer-term look at The iShares Expanded Tech-Software Sector ETF (IGV), and a break above $90 will be “powerful for upside momentum,” O’Hara said. “If the IGV can break above $90, the short-term target is $100/$105.” The fund was trading around $87 on Monday.

Meanwhile, caution is warranted on the iShares US Home Construction ETF (ITB) with the price starting to form a pattern that resembles a topping formation. “The ITB remains above its rising 200 DMA but a break below $100, in our opinion, will have downside risk to ~$90.” The ETF was above $98 during Monday’s session.