LABU Snaps Back After Rough End To July

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

The Direxion Daily S&P Biotech Bull 3X Shares LABU slumped to close July, but with the fight against the coronavirus still raging on, LABU could rebound in August.

What Happened

There are signs that's happening. LABU, which looks to deliver triple the daily returns of the S&P Biotechnology Select Industry Index, jumped 12.50% on above-average volume on Monday, the first trading day of August.

One day doesn't make a trend, but it's worth nothing that LABU's start to August is impressive because the broader healthcare sector is typically mediocre at best in the eighth month of the year and doesn't rank as one of the top sectors on a historical basis this month.

Why It's Important

Although LABU's underlying index is chock full of companies that aren't involved in developing a coroanvirus vaccine or testing for the virus, that's the issue of the day and it will likely continue dominating healthcare ETF headlines for the remainder of 2020.

“The industry’s strength can be attributed to a mix of the broad market’s strong bounce following the March sell-off, as well as a steady drip-feed of information regarding clinical trials in the race to discover a vaccine for COVID-19,” said Direxion in a recent note.

Moderna MRNA is leading the COVID-19 vaccine race, but several other top 10 holdings in the S&P Biotechnology Select Industry Index are benefiting from the competition, too, including Inovio INO.

“Like Moderna, much of the momentum is thanks to the company’s own INO-4800 COVID-19 vaccine candidate, which has recently entered phase 2 and 3 efficacy trials,” according to Direxion. “However, the stock also owes a good deal of its recent price action to news of $71M contract with the U.S. Department of Defense. The contract is intended to provide funding for the production of its Cellectra smart delivery devices, which inject the company’s INO-4800 immuno-response drug.”

What's Next

For active traders, these are go-go days in which to deploy an ETF like LABU because of the spigot of coronavirus news flow is gushing, presenting event-driven scenarios on which leveraged ETFs thrive.

“The market and the world at large will likely be subject to the ebb and flow of the ongoing public health crisis for months and perhaps years to come,” said Direxion. “It’s no wonder why investors are so keen to focus their attention on the world of pharmaceutical research, since it holds the key to regain a semblance of order over a world suddenly thrown into doubt.”

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.