The iShares NASDAQ Biotechnology Index (IBB) has surged in the last three weeks, climbing from a low pivot of $249 to a high today of $285.55. Investors are chasing this sector but in reality it is still broken and will likely take another beating soon.
Below are the three reasons the IBB is a great short trade.
1. This sector still is priced too high. Many biotech companies with suspect drugs in their pipelines are trading at high P/E's. This places a lot of stress on those drugs working out, or many stocks can see a 50% decline. In addition, big player drug prices will have to come down based on #2.
2. The political landscape has changed greatly in the last few years. Biotech companies are now the devil to the average American and politicians will promise reforms like drugs price caps. The fear alone will cause smart/big investors to be net sellers on any major pop, especially ahead of the elections.
3. The $IBB is nearing major resistance at $290. On a technical basis, this is going to be a huge resistance level and likely to hold, especially with the markets near all time highs. With a nearing a Brexit vote, elections, Fed rate hike, the markets are likely to see some downside. With the IBB being near resistance, a pull back or bigger drop is likely. In addition, the 200 day moving average is nearing at $298.00. This is a monster level of resistance.
Below are the three reasons the IBB is a great short trade.
1. This sector still is priced too high. Many biotech companies with suspect drugs in their pipelines are trading at high P/E's. This places a lot of stress on those drugs working out, or many stocks can see a 50% decline. In addition, big player drug prices will have to come down based on #2.
2. The political landscape has changed greatly in the last few years. Biotech companies are now the devil to the average American and politicians will promise reforms like drugs price caps. The fear alone will cause smart/big investors to be net sellers on any major pop, especially ahead of the elections.
3. The $IBB is nearing major resistance at $290. On a technical basis, this is going to be a huge resistance level and likely to hold, especially with the markets near all time highs. With a nearing a Brexit vote, elections, Fed rate hike, the markets are likely to see some downside. With the IBB being near resistance, a pull back or bigger drop is likely. In addition, the 200 day moving average is nearing at $298.00. This is a monster level of resistance.
3 Reasons The Biotech ETF $IBB Is A Short
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