For many traders and active investors, sectors like health care and utilities have been discussed recently as potential safe havens during an April correction.
Depending on what happens over the balance of the month, this may turn out to be true. In the short-term, however, the stocks of the health care sector, at least, appear to offer more of the same sort of potential risks and rewards as the rest of a stock market that is very much in pullback mode.
And while not every health care stock mirrored the massive gap down in Molina Healthcare (NYSE: MOH), which dropped by more than 25% on Monday on news that the health care plan servicers was among those to lose a major contract with the state of Ohio, the selling in health care stocks – from care plans to hospitals – has been widespread.
Taking a look at other stocks in the health care plan section of the health care sector, we see further serious, short-term weakness. Shares of Centene Co (NYSE: CNC) pulled back by more than 15% in Monday’s trading, dropping to new, two-week lows and finishing in oversold territory for the first time in a month. Also moving lower in this group is Wellcare Health Plans (NYSE: WCG), which pulled back by a relatively more modest, 7% ahead of trading on Tuesday, nearing both new, 10-day lows and technically oversold levels.
Of these three stocks, the highest ratings go to Molina Healthcare, which earned a ratings upgrade to 7 out of 10, one point below our “consider buying” category. That said, MOH has also developed a significant, short-term edge of well over two and a half percent, and likely has already attracted the attention of traders and more active investors who specialize in trading gaps (Want to be one of them? Click here to learn how to trade stock gaps.)
For their part, both Centene and Wellpoint have neutral ratings of 6 out of 10. But CNC and WCG already have developed strong positive edges in the short-term, with Centene set to open with an edge comparable to that of Molina Healthcare above, and Wellcare Health Plans has an edge of more than one and a half percent.
And, as I mentioned, the selling is ubiquitous throughout the health care sector. Hospital stocks like Community Health Systems (NYSE: CYH) are trading oversold have closing lower above the 200-day moving average for a third day in a row. Even a generic drugmaker like Mylan Inc. (NYSE: MYL) is selling the pressure, pulling back by more than two and a half percent ahead of Tuesday’s open, to finish short-term oversold for a second day in a row.
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David Penn is Editor in Chief of TradingMarkets.com