What Traders Are Saying
In recent days, volume has been benign in both LABU and LABD, but over the past month, the bullish LABU has a decided advantage over its bearish counterpart when it comes to attracting money from traders.
Over the past 30 days, traders have been pouring an average of almost $1.5 million per day into LABU while the bearish LABD is suffering daily outflows averaging of nearly $375,000, according to Direxion data.
“So, clearly, Biotech is doing just fine from drug approval and M&A standpoints. But it’s understandable why some investors would be hesitant to jump back into biotechs,” said Direxion.
Lingering Concerns
The aforementioned data confirm that short-term traders are clearly favoring the bullish LABU over the bearish LABD, but that sentiment can rapidly change and there could be reasons to reevaluate LABD in the near future.
“For the bearish among us, there are several potential catalysts that could lead to a reversal in Biotech: mainly, the IPO window closing (preventing the sector from raising much-needed capital); a frothy VC market that could lead to out-of-whack valuations; or most importantly, that the drugs simply don’t work,” according to Direxion.
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