Two Breakout Healthcare Stocks Set for Double-Digit Gains

As we've seen, one of the most powerful advantages of my proprietary "Best in Breed" system is that it not only finds hard-charging companies, but entire "under-loved" sectors on the verge of explosive gains as well.

The BiB screen flashed healthcare for yesterday, and I sent everyone a note to let them know to dive in.

But the BiB's not done - not by a long shot.

There's still lots of upside opportunity here, in these two specific buys...

These Companies Are Leading the Sector Much Higher

Eli Lilly and Co. (NYSE: LLY), which has a 2.5% weighting in the XLV ETF I showed you yesterday, is looking really good right now.

Lilly made the newswires this morning, announcing that it was scrapping late-stage trials of an experimental Alzheimer's drug they were co-developing with AstraZeneca Plc. because it wasn't meeting treatment goals.

Yet the stock has hardly suffered, trading near breakeven in early afternoon trading.

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Since dipping to a three-year low on Feb. 9, Lilly has gained an impressive 16%, while the XLV has managed a 7% advance. The move has the stock trading above its 50-day and 200-day moving averages, which are both pointed higher.

What's more, these trendlines are poised to form a bullish "golden cross" in which the 50-day moves above the 200-day. The last time that happened was in February 2017, in the middle of a monster 35% rally that spanned five months.


While on the low side, short interest increased 20% last month, indicating that there could be more potential for a short squeeze should the current rally continue.

Taking a longer-term view, the stock has gained ground for four straight months after bouncing off its 50-month moving average, which provided perfect support in late 2016. The last time Lilly closed a month below this trendline was in late 2011.

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With all signals pointing toward more upside, I'm targeting a move to $90, just above the October/December highs. Such a move could yield a double by playing the Aug. 17, 2018, $85 call.

Next on our Best in Breed healthcare list is Express Scripts Holding Co. (Nasdaq: ESRX), a St. Louis-based pharmacy-benefits management company. Express Scripts comprises 1.4% of XLV.

Like Lilly, Express Scripts has more than doubled the performance of XLV off the February bottom, rising around 15%. More recently, the stock has advanced 18% in the past five weeks, using the 200-day moving average for support.


Note in the chart that the 50-day is now riding higher after a two-month slide. The last time the 50-day turned higher was in December, as Express Scripts was in the beginning stages of a two-month rally that covered more than 35%.

As with Lilly, Express Scripts short interest is on the low side. But the number of shorted shares spiked 24% in the latest reporting period after a yearlong decline.

Finally, analysts are cool toward Express Scripts despite its recent chart success. Just seven of 20 covering analysts rate Express Scripts a "Buy," a configuration that should yield upgrades as the stock continues its advance.

My intermediate-term target for Express Scripts is the two-year high at $85, reached in March. You can leverage this expected move with the Aug. 17, 2018, $80 call.

Best in Breed has identified other under-the-radar sectors that you should have on your watch list. Stay tuned for more.

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About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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