The Bulls Are Still Running Right Here

It's said that there's always a bull market somewhere.

That may be hard to believe given the breathtaking decline we've seen across the board for the past week.

Wednesday was especially brutal, with the NASDAQ Composite dropping more than 4%, while the Dow and S&P 500 fell more than 3%.

While everything has tumbled this past week, not all sectors were beaten up equally. That's to be expected, of course.

But where's the "bull market somewhere"? Well, that's what my Best in Breed (BIB) analytical methodology is designed to find.

And while it won't find a sector that's making new highs these days - because there isn't one - it will uncover sectors that are outperforming the broader market and that are better positioned to advance once the market stabilizes.

Let's take a look at this tough sector...

[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]

This Sector Is Still a Best in Breed No. 1 Performer

Near the top of my Best in Breed performers stands the healthcare sector, as represented by the Health Care Select Sector SPDR ETF (NYSEArca: XLV).

For the past three months, XLV has been ahead of the pack, returning more than 10%. That's double what the Dow has gained and is more than four times the return of the SPX.

The Night Trader's Secret: A former Wall Street insider just revealed a new strategy for executing night trades that could set you up for potential $850, $2,250, or $6,775 paydays - overnight. Click here.

And it's easily beating the year-to-date return for the COMP.

SPX Graph

To be completely fair, XLV has pulled back of late. In fact, it's dropped about 4% from its all-time high reached on Oct. 1.

And Wednesday's market sell-off brought the ETF in contact with its 50-day moving average for the first time in more than three months. In contrast, nearly all sector ETFs that we track are trading below their respective 50-day trendlines.

Furthermore, as BIB reveals, XLV's 50-day is in one of the strongest uptrends. And, digging down to the stock level, XLV has one of the highest percentages of component companies trading above their respective 50-day moving averages, an indication of strength throughout the sector.

 

XLV Graph

Scanning through the list of XLV component stocks, two stood out as having withstood the recent market selling and being in position to continue their outperformance (call them the "best of the best in breed").

These Two Stocks Endured the Market Sell-Off

First up is CVS Health Corp. (NYSE: CVS), which on Wednesday received preliminary approval from the U.S. Department of Justice for its proposed $69 billion merger with Aetna.

Perhaps that's why the stock dropped less than 1% on the day and remained atop its rising 20-day moving average, a trendline it hasn't closed a day below in two months.

CVS Chart

While an advance of 25% off the August low is impressive, I like the fact that short interest on CVS has more than doubled during the past year.

While Everyone Was Sleeping... a former Wall Street insider executed night trades, banking 217% total gains in less than a week. Now, he's sharing his strategy for the first time ever...

With a short-interest ratio of 7.1, the stock should get a boost from short covering, especially if the shares can stay above the 20-day moving average.

With one hurdle cleared for its merger and the stock holding firm against a tumbling market, CVS should be able to easily overtake its 2018 high just below 84.

If that happens, the in-the-money CVS Jan. 18, 2019 $75 call (CVS19011875.00C) should double your money by year's end.

XLV's second stock of note may not be as well-known as CVS, but it's performed better than CVS year to date. It's Henry Schein Inc. (NASDAQ: HSIC), a provider of healthcare products and management services to dental, veterinary, and physician practices.

After hitting a three-year low in early March, Henry Schein has been a beast, gaining nearly 40%. The rally has stair-stepped higher along the dual support of its 20-day and 50-day moving averages and resulted in a 52-week high just last week. And like CVS, the stock has held up well during the past week to remain above its 20-day.

HSIC Chart

Also like CVS, short interest is a primary factor for believing that the rally will continue. But there's a twist.

While we haven't yet seen an unwinding of short interest with CVS, the process has clearly begun with Henry Schein.

You Have to See It to Believe It: Chris Johnson is the Night Trader, and his most powerful tool tells him exactly which stocks are set to go up tomorrow, the next day, the day after that, and beyond. And it is rarely ever wrong. Click here to learn more...

Note in the chart below how short interest increased more than 10-fold between last August and April. Since then, however, the shorts have been covering their losing bets, which aligns closely with the stock's seven-month rally.

But the short squeeze is just beginning, as Henry Schein's short-interest ratio is still above 14. That means there's plenty of short interest remaining to fuel a continued rally.

With the stock hanging tough this past week, short covering should continue the extended rally.

HSIC Short interest

Look for Henry Schein to take out its all-time high at 93.50 reached last year, which represents a move of just around 8%. The HSIC Jan. 18, 2019 $80 call (HSIC19011880.00C) is well positioned to take advantage of this move and beyond.

This Trader Is Betting It All He Can Show You How to Turn $5,000 into AT LEAST $174,500

Chris Johnson is on pace to see 3,390% total winning gains this year.

And now, he's guaranteeing his recommendations will give you the chance to do the same.

If not, he's working for free.

So mark your calendar for one year from today...

Set a reminder on your phone...

And click here to learn how to join right now.

Follow Money Morning on Facebook, Twitter, and LinkedIn.

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.

Read full bio