When short sellers retreat, long investors reap the rewards. But buyers of booming biotechnology stocks should take it as warning.

If the biotech sector is in a bubble, it has yet to pop. After a brief selloff in April, the Nasdaq Biotechnology Index has regained its mojo; it is up nearly 20% so far this year. If it keeps this up, it is on its way to beating the broader stock market for a fifth consecutive year.

Meanwhile, demand for new issues is as strong as ever: Shares in Axovant Sciencessoared 99% on Thursday after the company raised $315 million in its initial public offering, the largest one on record for a biotech company. Axovant bought its drug candidate to treat Alzheimer’s disease from GlaxoSmithKline in December for just $5 million up front. Axovant is now valued at more than $2 billion.

For more details, go to: http://www.wsj.com/articles/biotech-gets-a-reality-check-1434307132