Impressive gains from a medical equipment company following particularly promising clinical trials helped the healthcare sector gain more than 1% on Monday. This was the single bright spot on a day when stocks moved lower. Still in the red year to date, the sector has made an impressive comeback over the last month, gaining nearly 3%.

A notable subsector gaining from this uptrend is biotechnology. After declining over the last three months, the iShares Nasdaq Biotechnology (IBB) is in the black once again. This makes it imperative to pick shares from this portfolio at this point in time.

Factors Supporting Recovery

Monday's gains for the sector came on the back of encouraging clinical trial results for Edwards Lifesciences Corp. (EW – Analyst Report) which gained 17%. According to the company, data from the trial reveals that a procedure which uses its SAPIEN 3 valve shows better results than open heart procedures for certain patients.

Positive results from clinical trials are one of the key triggers that lift the sector's stocks. They are difficult to predict, but come as welcome surprises for investors. However, there are other factors that are more predictable and likely to help the sector's stocks gain over the rest of the year.

First, earnings are likely to improve from Q1 numbers which are usually weaker due to the seasonal influence on inventories and a small number of guidance raises. Also, the wariness over the impact of elections is likely to abate as the campaign progresses. More activity on the merger and acquisition front will also be beneficial to the sector.

Possible Downsides

On Monday, the U.S. Treasury Department announced new rules designed to contain inversion-related deals. The potential merger between Pfizer Inc. (PFE –Analyst Report) and Allergan plc (AGN – Analyst Report) is likely to fall through as a result of this development. Additionally, measures may be taken to prevent financial transactions which lower profits of multinationals that are taxable in the U.S.