Biotech is the Next Big Squeeze

A historic squeeze in the biotechnology industry is brewing, and few investors are prepared for it.

This group of stocks has been dead money for years. 

While global equity markets have surged to fresh highs, this high-beta group has been stuck in the mud, grinding sideways and frustrating anyone who’s dared to own it.

Now? It’s one of the most hated corners of the market. The consensus view is that these stocks will never trend higher again.

But that’s precisely what happens at market extremes.

When everyone is already leaning to one side of the boat, there’s no one left to push it any further. That’s when the tide turns.

So what if biotech finally catches a bid?

What if this forgotten sector starts playing catch-up?

That would trigger a massive unwind in bearish bets, and the S&P Biotech ETF $XBI is the powder keg.

Short interest in the XBI hasn't been this high in years:

As you can see, short interest in the S&P Biotech ETF is back to the same extreme levels we saw at the depths of 2020. 

What happened the last time sentiment was this negative? The XBI ripped 175% in a year, as short sellers were forced to unwind their positions dramatically.

Today, conditions look eerily similar. 

Short interest is stretched, bases have been forming for years, and the pressure is building under the surface like a volcano ready to erupt. 

In our view, short sellers are about to get steamrolled.

But betting on biotech at the ETF level isn’t the optimal way to play this. 

The real opportunity is in identifying which individual stocks are best positioned to deliver explosive upside. That’s where our Freshly Squeezed framework comes in.

We start with a universe of biotech stocks greater than $500M in market capitalization with at least 12% short interest. 

Right now, 94 names meet that criteria. 

From there, we overlay our volatility squeeze ranking system to pinpoint the setups where investors are not only mispositioned, but where volatility has compressed to extreme levels. 

As we know, volatility compression almost always leads to volatility expansion, and we believe the expansion will be to the upside.

After applying our screen, we're left with a refined watchlist - the Double-Squeeze Biotech table - featuring the most asymmetric opportunities in the entire industry.

Take a look at the names that popped up in our scan:

At the top of our leaderboard are names like Arcellx $ACLX, Cidara Therapeutics $CDTX, and Immunocore $IMCR. These are the kinds of stocks that are set up to lead the next leg higher for biotech.

We also have lists that are filtered by short interest and days-to-cover.

Conditions are ripe for a historic squeeze in biotech. The only question is which stocks will lead the way once the squeeze ignites?

We have laid out our highest-conviction trade ideas for ASC Premium members. If you want the exact levels we’re watching and the upside targets we’re trading toward, you can unlock them all here.

ASC Premium members can see the setups below 👇