Amgen — Amgen, the second largest holding in IBB, has a weight of 9.49%. Although Amgen reported their fourth-quarter 2015 earnings result that beat top-line and bottom-line expectations, investors are still concerned about the launch of PCSK9 cholesterol lowering drug Repatha (evolocumab), due to a lack of details from management.

In March 2015, Sandoz, a Novartis (NYE:NVS) subsidiary, received approval from the Food and Drug Administration (FDA) for its cancer treatment drug Zarxio, a biosimilar of Amgen's Neupogen. Although Zarxio's selling price is 15% less than Neupogen, thus far, Amgen hasn't seen a significant drop in worldwide sales of Neupogen, according to their latest fourth-quarter 2015 earnings report. Amgen could lose some market share of its Enbrel drug to Biogen’s Benepali, a biosimilar candidate to the reference product Enbrel, when Benepali is launched.

It was a turnaround for Amgen when the company submitted a biologics license application (BLA) for ABP 501, a biosimilar of Humira (adalimumab), to the FDA on January 25 for review. Humira, AbbVie’s top-selling drug for treatment of a variety of autoimmune diseases, generated sales of about $14 billion last year.

Technically, shares of Amgen have been trading in a symmetrical triangle chart pattern as investors can’t decide in what direction the stock will move next. In our viewpoint, the stock is bouncing around the $145.25 level and looks like it is ready to move higher, as investors are expecting more information and encouraging news on Repatha.

Celgene — As of February 1, Celgene has a weight of 9.18% in IBB. Investors were not quite impressed with Celgene's fourth-quarter 2015 earnings report, which came in below expectations, citing higher expenses than anticipated and the usual currency FX problem. Investors still like the company, as Celgene is expecting strong growth in 2016 but is still facing a currency headwind of approximately $120 million.

Technically similar to BIIB, CELG has been trading in an ascending broadening wedge chart pattern with a base at around $87.42 per share. The stock hit an all-time high of $140.72 per share in the summer of 2015, and has since pulled back to below the $100 per share level, falling along with shares of IBB. In fact, CELG shows a strong positive correlation (+0.95) with IBB over a 5-year period. The stock is bouncing on the trendline support of the broadening wedge and can bounce off from there.

Similar again to BIIB, investors may want to be careful as a potential bearish head and shoulders chart pattern has also emerged with the neckline at $96.33 per share. The stock could pull back further to the $87.42 per share level, if the trendline support of the broadening wedge doesn’t hold.

Conclusions — The iShares Nasdaq Biotechnology ETF is in deeply oversold territory. Shares of Celgene, Amgen and Biogen are about to bounce off technical supports while IBB investors are awaiting earnings reports from Gilead Sciences and Regeneron Pharmaceuticals. Since there will be more stump speeches and debates from the presidential candidates from both parties from now until the general election in November, we are expecting more volatility in the sector, with a bias to the upside. Although political and others risks have increased, in our view, the risk reward is still in favor of the investors in the biotech sector.

Disclosure: Long positions of BIIB, CELG, REGN and ABBV in portfolio. No positions in other companies or indices mentioned.

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BIOPHARMA STOCK ANALYSIS