Tuesday’s half-session certainly got started on the right foot, with the bulls pushing further into the black. It would be a short-lived bullishness though. By the time the early closing bell rang, the S&P 500 was in the hole to the tune of 0.5%. Micron Technology (NASDAQ:MU) led the way, losing more than 5% on Tuesday when China announced it had temporarily banned sales of its good there.
Traders looking for higher-odds trading prospects, however, will want to look at Express Scripts Holding Co (NASDAQ:ESRX), Alexion Pharmaceuticals (NASDAQ:ALXN) and Ventas (NYSE:VTR) … each of which are actually getting into a bullish groove despite Tuesday’s lull.
Express Scripts Holding Co (ESRX)
The wave of M&A within the healthcare arena, and within the pharmaceutical distribution sliver of the market in particular, has been a blessing and a curse for Express Scripts Holding.
If you can get a grip (and a read) on its chart, though, you can play that volatility nicely. Right now we’re at the early stages of a decent breakout that could turn into a huge one.
Click to Enlarge • Fueled by support at the 200-day moving average line in March and then again in May and then prodded by support at the 50-day moving average line a week ago, the bulls have made it clear they’re not willing to back down.
• The monthly chart indicates that the bullish move in December not only broke above a falling resistance line that had extended back to 2015’s peak, but has put a string of higher highs and higher lows in place.
• The $83.50 level is a checkpoint target. That is to say, that prior peak might be a peak again, but traders may want to assess the rally’s momentum at the time. If ESRX can push through that level, there’s little that will be able to hold the stock back.
Alexion Pharmaceuticals (ALXN)
Alexion Pharmaceuticals is on the beneficial end of a calendar-based tendency already. That is, the summertime is usually a great time of year for biopharma names anyway. On average, biotech stocks gain more than 7% over the course of July and August. This year could be even bigger, by virtue of the fact that this segment of the market has underperformed year-to-date.
There’s another bullish prod for ALXN right now though — double-digit revenue growth is leading to even more earnings growth. The pros think last year’s per-share profit of $5.86 will reach $8.53 per share next year.
Click to Enlarge • It’s been a painfully slow process, but the pullback that’s been in place since late 2015 has actually been halted, and replaced by a new (though still tepid) uptrend. We just saw a new MACD bullish divergence take shape.
• The 50-day moving average line is about to cross above the 200-day moving average line, indicating that short-term trend has turned into a more solid, long-term one.
• A little more progress from its current price of $125.76 would seal the deal and convince traders still on the fence that the tide has indeed turned, completing the turnaround process. And, there’s still plenty of room to recover.
Just because a stock made forward progress on Tuesday in the face of marketwide weakness doesn’t inherently make it worth owning. But, it certainly doesn’t hurt the bullish case.
Enter Ventas. VTR shares were up a little more than 2% on Tuesday for no particular reason, underscoring the impressive 26% rally we’ve seen unfurl since late April. The buyers aren’t playing games here.
Click to Enlarge • The advance has been largely fueled by a revisit to the lower edge of a trading range that has been in place since late 2013. We’re already halfway back to the most likely ceiling around $69, but the distance between here and there is still enough to take a shot at.
• Despite only being a half session (and one few people were bothering with anyway), Tuesday’s volume behind the healthy gain was unusually high, suggesting there’s plenty of belief in the company’s foreseeable future.
• Don’t sweat a lull too much. In the very near term, VTR shares are a little overbought and deserving of a breather. The litmus test will be how the stock responds to its first real adversity. The 200-day moving average line near $55 will be a big make-or-break level.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
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