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It's been a long time baby

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I can't remember the last time I started getting "excited" about a potentially bullish move in healthcare stocks, but recent trading from Oxford Health (NYSE:OHP) and current technicals in the Morgan Stanley Health Provider Index (RXH.X) has sector bulls looking for some good risk/reward bullish trades.

Morgan Stanley Health Provider Index - Daily Interval

The RXH.X leads sector gainers today along with the Biotech Index (BTK.X). I think bullish traders can be nipping away at some healthcare related stocks. In last night's premierinvestor.net market wrap I felt shares of UnitedHealth (NYSE:UNH) may be a focal point for bullish traders in this sector. In the past hour, shares of UNH did begin to break above a very short-term downward trend at $71.40 and currently trade $71.49 (+1.26%). Subscribers will note that's the same percentage gain found in the RXH.X giving hint that UNH is trading with the sector. If you get a chance, subscribers may also want to take a look at the $RXH.X on a $2 box scale and use that chart to help understand the supply/demand characteristics. I believe it represents some very good risk/reward for bulls.

YIELD alert!

In this morning's market monitor on OptionInvestor.com I felt that equity bears trading the SPDRS (AMEX:SPY) short might want to look for a 10-year YIELD below the 4.9% level to help trigger a decline in the broader equity markets. In the last 15-minutes I got that alert on YIELD. Currently, the Dow Industrials are trading down 5 points, the S&P 500 (SPX.X) is down 2 points and the NASDAQ Composite (COMPX) is down 7. The SPY is down $0.48 at $115.58. I like the SPY short, stop just above $118 and correlating this short/bearish trade with bond YIELDS. My thinking has been, if money is rotating back into bonds, then it will starve market of cash near-term and put broader market averages at risk to a lower move. Just playing the supply/demand game.

With healthcare getting a bid, it is entirely possible that we could see some bullish sector rotation to the healthcare stocks. They are less economically sensitive and recent catalyst and good news out of Oxford Health (OHP) has the MARKET's attention.

Healthcare components for $HMO.X are HUM, AET, PHSY, MME, OHP, WLP, UNH, FHCC, TGH, CI.

Jeff Bailey
Senior Market Technician
Option Investor

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