2 Biotech Stocks Burning Short Sellers

It's a big day for biotech stocks, which are largely rallying along with the broader market, and more specifically, gaining amid upbeat drug results and fresh M&A news. Among the stocks making impressive moves today are Foamix Pharmaceuticals Ltd (NASDAQ:FOMX) and Inovio Pharmaceuticals Inc (NASDAQ:INO). But not everyone is likely to be thrilled, as both FOMX and INO are heavily shorted stocks.

Beginning with FOMX. After the company announced positive results in a mid-stage study of its papulopustular rosacea topical treatment, FMX-103, shares of FOMX have soared 14.1% to $10.03. In fact, the stock is now just a stone's throw from its annual high of $10.26, seen last September.

FOMX has put in an impressive technical performance of late, rallying hard off its late-June lows south of $6, and recently bouncing off its 30-day moving average to bring its year-to-date lead to 24%. Still, the shares could run into trouble at the round $10 level -- home to today's intraday peak at $10.04, as well as double FOMX's all-time low.

Despite the stock's outperformance over the last few months, 8.6% of FOMX's available float is sold short. In fact, short interest has been climbing in recent months, and now represents nearly 13 sessions' worth of trading, at the stock's average daily volume. A short-squeeze situation could help the shares break out above potential resistance.

Elsewhere, sentiment toward FOMX is largely optimistic. All three brokerage firms tracking the stock give it a "strong buy" rating. What's more, the average 12-month price target stands at $20.75 -- deep in record-high territory.

Meanwhile, INO is trading 7.8% higher at $9.19, after editors at Popular Mechanics named the company's Zika vaccine a "2016 Technology Breakthrough." Additionally, the magazine noted that if all goes well, it "looks to become the fastest vaccine ever to come to market."

With today's gains, INO has added a healthy 37% year-to-date. And though the shares have been struggled under the weight of their 60-day moving average of late, they could be headed for a breakout. Specifically, it appears double-barreled support may be emerging at the stock's 200-day moving average and $8.50 level, with the latter having contained INO's pullbacks over the past two months.

The stock's technical strength has not stopped short sellers from piling on, however. These bearish bets climbed 7.5% during the two most recent reporting periods, and now account for a full one-fifth of INO's total float. At the stock's typical pace of trading, it would take short sellers nearly eight days to buy back all those shares.

Like its peer, INO has seen a more bullish stance among analysts. Currently four out of five brokerages call Inovio a "strong buy," without a single "sell" rating in sight. And the 12-month consensus price target also stands at a hefty premium to current levels, at $19.75 -- a level the shares haven't seen in roughly 11 years.

In the options pits, volume on both Foamix Pharmaceuticals Ltd and Inovio Pharmaceuticals Inc is typically light on an absolute basis. Today's rallies seem to have sparked interest among some speculators, however. Both biotechs are seeing call options change hands at an accelerated pace.

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