Aetna, Humana, Unitedhealth Lead Medical Stocks Lower
There is a popular school of thought that suggests that health care stocks tend to attract buyers in the spring months. And given the strong selling in the sector in late January, it is hard not to wonder if the correction preceding any outperformance among health care stocks is already underway.
Shares of health care plan stocks like Aetna (NYSE: AET), Humana (NYSE:HUM) and Unitedhealth Group (NYSE: UNH) have been among the most aggressively sold stocks in recent days. AET has closed lower for six days in a row as it retreats from its highest levels since July 2011. Humana dropped more than 2% to finish lower for a fifth day in a row ahead of trading on Friday. And UNH has closed lower for four out of the past six sessions. All three stocks are trading at new, short-term lows and in technically oversold territory above the 200-day moving average.
Has the selling in these stocks already contributed to significant edges? Both Aetna and Humana have earned ratings upgrades to 8 out of 10, putting both stocks in our “consider buying” category of stocks that have pulled back to levels where traders historically have been more inclined to buy in the short-term than sell. Unitedhealth Group has a 7 out of 10 rating, which puts the stock at the upper end of our neutral category.
Moreover, heading into the final trading day of the week, the biggest short-term edges are in Humana, which has a positive edge of 2% as of Thursday’s close. The short-term edge in Aetna is just over three quarters of a percent, while UNH has a more negligible short-term edge of half a percent.
Traders looking to avoid single-stock exposure to this group may want to consider an exchange-traded fund like the Healthcare Select Sector SPDRS ETF (NYSE: XLV). XLV includes all three of the stocks in today’s report and provides exposure to a number of blue-chip drugmakers such as Pfizer (NYSE: PFE) and Eli Lilly (NYSE: LLY). A related option is the iShares Dow Jones U.S. Healthcare Sector Index Fund ETF (NYSE: IYH), which provides similar exposure.
Both XLV and IYH traded modestly lower ahead of trading on Friday, and are set to open in neutral territory.
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David Penn is Editor in Chief of TradingMarkets.com