Biotechs struggled in the latter half of March, with the iShares Nasdaq Biotechnology ETF (IBB) shedding more than 13% from its mid-March high of $115.60 to its early April lows just north of $100. The shares have since bounced off the century mark and are now trading back above their 10-day moving average. Individual drug stocks Nektar Therapeutics (NASDAQ:NKTR) and Zoetis Inc (NYSE:ZTS) have pulled back to key trendlines, too, and could be headed even higher, if history is any guide.
Nektar Therapeutics Stock Bounces from 50-Day Trendline
Nektar Therapeutics stock topped out at a record high of $111.36 on March 12, before pulling back to its 50-day moving average — the best buy signal over the past year, according to Schaeffer’s Senior Quantitative Analyst Rocky White. More specifically, S&P 500 Index (SPX) stocks that have retreated back to this trendline in the last 12 months were 1.37% higher, on average, one month later.
More broadly, NKTR shares are up 70.9% year-to-date to trade at $101.93, yet options traders have been buying to open puts over calls at a quicker-than-usual clip in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity’s 10-day put/call volume ratio of 1.18 ranks in the 90th annual percentile. While some of this activity could be bearish, it’s likely shareholders are initiating options hedges, too.
Outperforming Zoetis Stock Overdue for Upgrades
Zoetis stock also pulled back to its 50-day trendline recently, after the security hit an all-time peak of $85.73 on March 21. More recently, the shares were trading at $83.06, up 15.3% so far in 2018.
Part of this upside has been fueled by short sellers. Short interest has been cut in half year-to-date to 3.8 million shares. While this source of buying power has been nearly depleted — it would take fewer than two sessions to cover the remaining shares, at the average pace of trading — six of 16 analysts maintain a tepid “hold” rating on ZTS stock. Upgrades could create bigger tailwinds for the equity.
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