The struggling biotechnology group and exchange traded funds such as the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), which tracks the Nasdaq Biotechnology Index, are leaving investors wondering when this once hot corner of the market will rebound.
The biotechnology sector has been among this year’s worst performing areas of the market as investors shifted out of high-flying growth stocks in face of increasing market uncertainties for more value plays.
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 tweet was in response to then CEO of Turing Pharmaceuticals Martin Shkreli, after Turing raised the cost of an older antibiotic drug, Daraprim, by more than 50-fold and said the drug was still a bargain at $750. Since then, IBB’s short interest has dropped to 5.7 million shares, as of settlement on June 15, 2016, or about 22.89% of shares outstanding,” according to a Seeking Alpha analysis of biotech short interest.
[related_stories]Investors who are closely watching the presidential race will want to keep an eye on Clinton in the coming months. If Clinton makes her way to the Oval Office and implements more regulation on pharmaceutical drug pricing, biotech companies may underperform the broader market.
IBB and rivals such as the SPDR S&P Biotech ETF (NYSEArca: XBI) and the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT) are among the previously high-flying biotech ETFs that have been sapped by politicians, looking to earn voters favor in an election year, attacking high drug prices.
Related: Hit The Lab With These 17 Biotech ETFs
“From a technical viewpoint, IBB bounced off the $240 support level, or the February low, and broke back into the symmetrical triangle chart pattern. There are three major resistances at $280, $285 and $290, respectively, as the IBB continues to move higher. Closing and staying above the 200-day moving average will trigger a short squeeze,” adds Seeking Alpha.
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iShares Nasdaq Biotechnology ETF
