(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Biotech stocks are nearing a big break out as measured by the SPDR S&P Biotech ETF (XBI). The group is already having a strong start to 2018, quietly outpacing not only the S&P 500 but the most talked about sectors in the market, technology (XLK) and consumer stocks (XLY). But tech and consumer stocks may be soon taking a back seat to biotechs should the group break out and pull away from the rest of the market. 

Sage Therapeutics Inc. (SAGE) and Ultragenyx Pharmaceutical Inc. (RARE) may be two stocks that lead that group higher, with each of the stocks having the potential to rise by 12% or more in the coming weeks. 

Biotech Sector

The biotech ETF is sitting right below a significant resistance level at $97.90, the previous all-time high for the ETF, and should that price rise above technical resistance, it would mark a big breakout. The current technical pattern in the chart suggests a breakout is likely to happen soon. The pattern is a rising triangle, which is known as a bullish continuation pattern. Based on the current trend, the ETF may rise by about 6.5% to roughly to $103.5, from its current price around $97.50.

The relative strength index (RSI) is also trending higher and sits at 65, which suggests the stock may continue to rise as well. The RSI would have to increase to over 70 before reaching overbought levels. 

Sage

Sage Therapeutics has been hot over the past year, with the stock rising 110%. The stock appears to be trying to break out, by crossing a technical downtrend that has been in place since January. Should the stock be successful in doing so, it could see it's share rise to about $195, a jump of about 18.5% from its current price around $164.50. 

Ultragenyx

Ultragenyx is another stock that appears poised to rise, with shares already breaking out, rising above a technical resistance level around $77.60. The stock rose above resistance at the start of June. Now that resistance level will act as technical support, working as a floor in the stock should shares try to drop. The next technical resistance level doesn't come until nearly $89, an increase of 12.8% from the stock’s current price of $78.90. 

Biotech stocks have not only been hot thus far in 2018, but they soon may pull away from the rest of the pack and be drawing all the attention of investors. 

Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.