The Biotech Resurrection

Investors left biotech for dead.

For years, this group has been the market’s punching bag - a graveyard of broken charts, failed drug trials, and shattered dreams. 

While tech and AI stocks skyrocketed, biotech investors sat on the sidelines, wondering if the glory days would ever return.

But markets have a funny way of punishing the consensus.

When everyone gives up on a sector… that’s usually when the most significant moves begin.

Now, the tide’s turning.

The Biotech Clinical Trials ETF $BBC has exploded +118% since April, leading one of the most violent reversals we’ve seen all year:

The Biotech Clinical Trials ETF holds the smallest, riskiest, most speculative names in the entire market - and they’re screaming higher.

This is the sharpest multi-month rally we've ever seen in this fund's over 10-year existence.

As we say all the time around here, big moves begin with big moves.

In other words, extreme amounts of buying pressure tend to lead to more buying.

Meanwhile, the equal-weight Biotech ETF $XBI is on the cusp of the biggest short squeeze 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, a textbook multi-year bearish-to-bullish reversal pattern has formed, and pressure is building beneath 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 with a market capitalization exceeding $500 million and at least 12% short interest. 

Currently, 104 names meet that criterion. 

From there, we overlay our volatility squeeze ranking system to pinpoint setups where investors are not only mispositioned but also 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 Madrigal Pharma. $MDGL, Mirum Pharma. $MIRM, and Mineralys Pharma. $MLYS. These are the types of stocks that are well-positioned to lead the next leg higher in the biotech industry.

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 👇