Healthcare stocks to invest in
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Markets ended the third quarter with a thud, where the S&P retested the September low and even violated it on Friday. The toxic combination of global supply chain disruptions, an energy crisis in China, inflationary pressures due to wide-ranging shortages, rising bond yields, a few earnings warnings and the inability for Congress to pass an infrastructure bill has the market retreating by 5% off the highs set in late August.
The question all traders ask is how much of the bad news is already priced in and will a 5% pullback turn into a 10% correction. This is hard to say, given the high level of liquidity that is coming out of the bond market seeking positive inflation-adjusted returns that are in liquid asset classes. This tends to be a strong argument for equities if rates rise only incrementally, but so far, it’s been a very bumpy ride.
In what is a very positive development, data on COVID-19 is improving and Merck announced Friday they are developing an antiviral drug in pill form that will help to keep COVID-19 patients out of the hospital. Against this news, the reflation and reopening stocks are getting a much-needed boost and the overall market is finding some support.
There is most certainly rapid sector rotation underway as sentiment shifts are taking place almost daily – and this is exactly where the power of our AI models in our Weekly Power Trader advisory service becomes so valuable in identifying those ETFs and stocks with which to trade.
The $SPY continued the recent pullback and retested last week’s lows at $429. The value/reflationary stocks sold off, down 1.5%, and settled right above last week’s lows. Technology continues to trade in the red, on the $TLT free fall, down 0.4% right at the August lows.
The $DXY is short-term overbought and continues to rise near $94, long-term overhead resistance from the September 2020 high. The $TLT has pulled back and retesting key support levels (July and August lows), 200-day moving average. The $TLT pullback is the key development in the market.
Volatility jumped back to 25 (VIX was at 29) and SPY short-term oversold and will start rebound in the next 1-2 sessions (extreme levels at $TLT, $DXY, $VIX). The $SPY short-term support level is at $428, followed by $420 (sustained break below $428 is a low probability event at this point). The SPY overhead resistance is at $443 and then $446. I expect the bottoming process to continue this week and next.
At this point, I believe the recent low at $428 is set. The unemployment numbers this week might push the market briefly below the recent lows. I would be a buyer of value stocks on pullbacks and sell technology stocks on rallies.
I would consider rebalancing my portfolio at this time and have a bullish portfolio. The market bottoming process may continue for the next 1-2 weeks. Market corrections are never a one-way trade.
Based on our models, the $SPY can pull back 5-7% from the all-time highs in the next 1-2 weeks. If you are trading options consider selling premium with November and December expiration dates.
"BUY" signal based on the Aggressive Power Trader Portfolio for tomorrow is at $427 level using SPY and "SELL" signal is at $434 for short-term traders.
Based on our models, the market (SPY) will trade in the range between $428 and $455 for the next 2-4 weeks.
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Signals have historically averaged over 86% accuracy in my live trading since inception. Sometimes we hold position 2-5 days by using options (selling OTM Calls and Puts spread) and targeting 1% target gain and 1% stop loss using stock price. The green color should be interpreted as a bullish signal and the red color as a bearish signal.
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As a reminder, consider buying near the "BUY" level with a "10 days prediction" higher than the close price. In our live trading room, I usually hold a position for 1-2 days.
I allocate less than 5% of my portfolio if the position is being held overnight. On average, less than 1% of the portfolio should be at risk, if you own a position for less than one day.
I enter a position at the predicted LOW (BUY) price or yesterday's close price. My stop loss is 1% and my target gain is 1% of stock price. I target 75% accuracy using these signals.
Few subscribers asked about Options trading using the signals provided. Please review live trading room recordings. I often sell OTM credit put spread using weekly options and collect 0.5% using stock price. For example, if the stock is trading at $100, I would sell OTM put (strike less than 100) with option BID price close to $0.5.
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“HOW I BANKED AN 86% WIN RATE SINCE JANUARY 1, 2020 THROUGH A GLOBAL PANDEMIC AND HOW WE EXPECT TO DO AS
INFLATION STARTS TO REAR ITS UGLY HEAD?”
[CLICK HERE TO FIND OUT MORE…]
Interest rates have moved up fast, probably too fast, in reaction to the Fed’s latest tapering rhetoric. The spike in bond yields pushed the entire market lower, but especially so for some high-quality defensive sectors like healthcare where growth rates remain very robust relative to utilities and consumer staples. Hence, there is a good cast to trade the healthcare sector and select healthcare stocks for a bounce.
The Healthcare Select Sector SPDR ETF (XLV) has pulled back from an all-time high of $137.05 set back in early September and now trades at $127 where many of the top holdings are now technically very oversold. The top 10 positions in XLV account for almost 50% of total assets with the who’s who of best-in-class pharmaceutical and medical device companies occupying the top spots.
Our AI-driven Seasonal Chart is providing a very bullish outlook for XLV, with all four 20, 30, 40, and 50-day probability periods registering “Higher” readings. When we get such a strong set of signals, it fits our trading profile to a tee. I hope all readers of this blog take full advantage of when we pull the trigger to go long this trade.
TRADE OF THE WEEK
Within the greater healthcare sector, traders can embrace certain stocks that are trusted names that have been sold down to levels that rarely come along. One of those stocks is UnitedHealth Group Inc. (UNH), the nation’s largest provider of medical insurance and a member of the Dow Jones.
Because of the prevailing theme that there will be some kind of government takeover of the healthcare system, health insurance stocks have come under steady pressure. But the winds of change of socialized healthcare are running into some stiff headwinds as Congress and the electorate are much leerier about taking on trillions of dollars of new spending. The drama now playing out on Capitol Hill is revealing just how little support there is for a big jump in new spending.
To this point, shares of UNH are trading down at their 200-day moving average with enrollments growing steadily and the company is expanding into the Medicare Advantage markets in 2022 that will fuel further top and bottom-line growth. 2021 earnings are forecast to be $18.75 per share and rise to $22.00 in 2022.
Aside from the compelling chart pattern, our AI platform is flashing a buy signal on the stock. The Seasonal Chart gives us three out of four “Higher” readings over the next 20, 30, 40, and 50-day periods.
This is what our precision AI platform does for our members. It identifies, clarifies, and verifies high-quality trades like a clear and newfound uptrend in stocks like UNH. By being a member of any one of our services, it’s these kinds of opportunities that our proprietary algorithms provide our members to look forward to every day, where they can put their risk capital to work on both long and short positions.
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The beauty of our AI-driven system is that we are always equipped to bring new trades to our members. Trades in best-of-breed stocks and ETFs that are not yet recognized by the larger universe of traders.
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Considering the choppy landscape of late, we’re taking advantage of market dislocation and valuation distortion. We’re striving to help our members ring the register all the time and this is why serious traders don’t trade without market-proven AI tools.
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