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Scottish Mortgage (SMT) Shares Edge Higher As Investors’ Bias Favours Biotech Firms

Simon Mugo trader
Updated 24 Aug 2021

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Scottish Mortgage Investment Trust PLC (LON: SMT) shares are up 2.3% after investor sentiment towards biotech and growth stocks turned positive on yesterday’s FDA decision.

The positive sentiment indicates a broader market shift towards growth and biotech shares that have lagged the rest of the market since January. Investors preferred to invest in value stocks that tend to do well in periods of economic uncertainty.

Yesterday’s decision by the US Food & Drug Administration (FDA) granting its full approval to the Pfizer/BioNTech COVID-19 vaccine, which many see as a favourable tailwind for other biotech companies working on various breakthrough treatments.

I had covered Scottish Mortgage (SMT) shares in a previous article where I posed the question as to whether the shares can break above the two resistance levels highlighted in the chart below.

So far, so good, SMT shares have broken above the first resistance level and went on to break below it and then above it showing the intense battle for control of its share price between bearish and bullish traders.

The FDA decision could provide the right momentum to carry the shares past the second resistance level, held since mid-February this year and marks its all-time highs.

Therefore, I would not be surprised to see SMT hit new all-time highs as investor fears regarding the emergence of more deadly variants of the coronavirus slowly dissipate and the world economy returns to a rapid growth trajectory.

The Scottish Mortgage Trust (SMT) is also set to benefit from the recent surge in the tech-heavy NASDAQ index, given that its top holdings, such as Moderna, are listed on the index.

The investment fund had a rough time in July when the Chinese government cracked down on the country’s tech giants, four of which were among the company’s most significant holdings, with Tencent Holdings being its largest holding at the time.

SMT has since trimmed its Chinese Holdings, given the regulatory risk present in China.

*This is not investment advice.

Scottish Mortgage shares price.

IG chart of Scottish Mortgage share price 24-08-2021

Scottish Mortgage shares are up 3.37% over the past month as investor sentiment shifts in favour of biotech stocks.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading