Painful Two Weeks for Biotech Short Sellers
Here's the creek, where's the paddle?
As the NASDAQ Biotech Index (NBI) prepares to break through another resistance level, one has to wonder how morale is on the other side of the trade. One way we've been gauging this is to follow short interest in the biotech sector. While I'm well aware of the limitations of short interest as a sentiment indicator, particularly in a market increasingly dominated by zero-volatility hedge funds, sometimes we have to make due with what we have. Morale "over there" has been pretty darn good as the chart below shows.
I've focused down on something we publish to our own Subscribers each month - the 15 most heavily shorted companies on the NBI as measured by short interest as a percentage of their float. I've taken a measure of their performance since the short interest as-of day on August 15 through the end of last week. I think you'll find the table illuminating...
Does this mean returns in these companies were accelerated by short covering given their broad outperformance of the overall NBI? I'm not sure we can say that. I think all we can say is for those short these particularly heavily shorted biotech names, the last couple of weeks of August were no picnic.
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