Not All Health Care Stocks Are Created Equal, So Play It This Way


Monday’s health-care stocks traded lower. Politicians on both sides of the isle have been very critical of drug prices and health-care costs. You can easily see and expect more political criticism of the health-care companies as the Democratic party tries to find a 2020 nominee. President Trump has also vowed to lower drug costs, so where do you invest in this diverse industry group?

Despite Monday’s declines in most of the major health-care stocks, the overall chart pattern of the Health Care Select Sector SPDR Fund (NYSE:XLV) is still looking good on the charts. This leading health-care ETF holds companies such as Johnson & Johnson (NYSE:JNJ), Pfizer (NYSE:PFE), UnitedHealth Group (NYSE:UNH), Merck & Company (NYSE:MRK), Abbott Laboratories (NYSE:ABT), Medtronic (NYSE:MDT), Thermo Fisher Scientific (NYSE:TMO), Amgen (NASDAQ:AMGN), AbbVie (NYSE:ABBV) and Eli Lilly (NYSE:LLY). This ETF is fairly diverse and is still showing a decent chart pattern on the bigger time frames. At this point, XLV is trading above its 50- and 200-day moving averages. As long as it remains above these key levels, this ETF continues to be in good shape. If a major decline happens in XLV, there should be major chart support around the $86.00 area. This is where the ETF was defended in mid-April 2019 and would likely be support again if retested.

The bottom line is that health care stocks have become very difficult to trade and invest in on an individual basis lately. The best way to play the broad-based industry group is likely through an ETF like the XLV, which gives you diversity to the sector and holds some of the best companies in the world. Should the equity trade sideways or even lower, it pays a 1.6% dividend while you wait for some appreciation to occur.

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