Healthcare volatility could be good for swing traders
A recent survey of analysts by FactSet revealed that we're in an "earnings recession" right now and that it's expected to get worse in the next quarter. Certain sectors have been particularly hard hit, namely mining and semiconductors. The sectors that are expected to report the best earnings this quarter are healthcare, utilities, real estate, and gold. These are defensive sectors that usually do pretty well when the rest of the market is down. Utilities and gold are priced a bit high right now, but could be good for an entry if they pull back. Real estate stocks are a slightly better value, but would also be better after a pullback. Healthcare stocks are cheaper, but they face a lot more political risk, especially with Elizabeth Warren leading the Democratic pack. Health insurance and pharmaceutical companies are at particular risk from "Medicare for All."
Given the extremely mixed outlook for health care right now-- its bullish fundamentals and bearish political risks-- I expect to see a lot of volatility in this sector. Direxion's and ProShares' leveraged funds are great for playing that volatility. For upward moves you want CURE, and for downward moves you want RXD. Alternatively you could play the pharmaceutical equivalents, LABU and LABD. Look to buy and sell oscillations between critical support and resistance or overbought and oversold levels. Roughly speaking, I'd guess that healthcare outperforms through earnings season but pulls further back as the election heats up. You can see from CURE's chart that this sector has been downtrending overall. I expect that to continue until at least the primary. (If a market Democrat like Biden gets nominated or if Trump gets re-elected, that would be hugely bullish for this sector. Hugely discounted healthcare stocks could surge overnight.)
Given the extremely mixed outlook for health care right now-- its bullish fundamentals and bearish political risks-- I expect to see a lot of volatility in this sector. Direxion's and ProShares' leveraged funds are great for playing that volatility. For upward moves you want CURE, and for downward moves you want RXD. Alternatively you could play the pharmaceutical equivalents, LABU and LABD. Look to buy and sell oscillations between critical support and resistance or overbought and oversold levels. Roughly speaking, I'd guess that healthcare outperforms through earnings season but pulls further back as the election heats up. You can see from CURE's chart that this sector has been downtrending overall. I expect that to continue until at least the primary. (If a market Democrat like Biden gets nominated or if Trump gets re-elected, that would be hugely bullish for this sector. Hugely discounted healthcare stocks could surge overnight.)
