Friday Slide: Opportunity Or Red Flag For Biotech ETFs? (GILD, IBB, XBI)

Don't blame all of the Nasdaq's weakness today on Apple AAPL and Google GOOG. Using the PowerShares QQQ QQQ as our guide, we that health care accounts for over 11% of the Nasdaq 100's weight and when it comes to Nasdaq-listed health care names, we're really talking biotech. That sector is providing plenty of consternation today for the Nasdaq with more than one guilty party. A loss of over 14% for Gilead Sciences GILD is ailing biotech ETFs and 7% drop for Life Technologies LIFE isn't helping matters. After healthy year-to-date performances for the top biotech ETFs, do Friday's declines signal buy-on-the-dip opportunities or is today's glum action a sign to take biotech profits and run? Let's see. iShares Nasdaq Biotechnology ETF IBB With almost $1.8 billion in assets under management, IBB is the dominant player among biotech ETFs. Given that Gilead is its fourth-largest constituent at 6.11% and that Life Technologies represents another 1.65%, the fund is holding up fairly well today, sort of, with a loss of 1.67%. IBB was up over 16% year-to-date at the start of trading today and faces stiff resistance in the $121-$123 area. If support isn't found at $117, IBB could tumble to $110. If that's where the declines end, then that's an excellent buy point for a potential gain of 10% or more. First Trust NYSE Arca Biotech Index Fund FBT At this writing, FBT is down almost 2% and that's probably because the ETF is home to just 20 stocks with Gilead and Life Technologies combining for over 10% of that weight. That narrow concentration cuts both ways. When an ETF's top-five holdings represent almost 30% of the fund's weight and those stocks are doing well, the ETF also does well. On the other hand, rough performances in the same day for 10% of an ETF's weight usually means bad news. FBT either needs a deeper pullback beyond today or a move above $43 to get some new buyers involved. Market Vectors Biotech ETF BBH On what is already above average turnover, the recently split Market Vectors Biotech ETF is getting drubbed to the tune of almost 3% today. Like FBT, BBH has a concentration problem and we don't mean attention deficit disorder. The ETF is home to just 26 stocks, but over 15% of its weight is devoted to Gilead and Life Sciences. Throw in Amgen AMGN and that trio is nearly a third of BBH's weight. BBH has outperformed IBB this year, but lagged FBT. That said, the diversification benefits of IBB on a day like today might make it a better bet for conservative investors looking to get biotech exposure. SPDR S&P Biotech ETF XBI For today at least, the SPDR S&P Biotech ETF looks like a wise idea if for no other reason than Gilead is just 3.74% of the ETF's weight and Life Technologies is nowhere to be found. The average weighted market cap of XBI's 43 holdings is just under $8 billion, so the ETF is deep in the mid-cap spectrum without a lot of speculative small-cap fare. Consider the following: "The best ways to take advantage of biotech stocks without the extreme volatility is by getting into IBB and XBI on corrections," according to noted biotech trader EXPstocktrader.