Biotech ETFs are at a Crucial Technical Juncture

In a year of volatility and struggles for the biotechnology group and exchange traded funds such as the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), which tracks the Nasdaq Biotechnology Index, investors are undoubtedly tired of hearing about biotech ETFs being at crucial technical junctures, but that looks to be the case at the moment.

However, a potential catalyst for biotech stocks and ETFs looms as traders that previously heavily shorted some of these names move to take profits and cover these winning bearish bets.

Related: Biotech ETFs Reeling in Longest Sector Selloff in Two Decades

According to the NASDAQ, on the settlement of September 30, 2015, IBB short interest surged 23.82% to 11.54 million shares, since Hillary Clinton sent out a tweet on September 21, 2015 saying, “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on. -H “.

The technical challenges and election year posturing facing biotech ETFs belies what some believe is still a bullish long-term investment thesis. The improved outlook for the health care industry comes as many expect continued growth in the sector, despite an ongoing so-called earnings recession in the S&P 500. While FactSet anticipates the broad S&P 500 to show an earnings decline of -9.1% for Q1 2016, the health care sector is expected to report revenue growth of 8.9%.