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My indicators are giving neutral readings this week, an upgrade from last week’s bearish readings, which was to be expected considering that fund managers have been putting new money to work for the past few days as the third quarter of 2018 begins.
The market is also still dealing with the potential for a trade war to fully develop in the near term. However, one thing that’s interesting is that the largest Chinese stocks, represented by the iShares FTSE/Xinhua China 25 Index (ETF) (NYSEARCA:FXI), are down a lot more than U.S. stocks. That tells me the U.S. has an advantage over China, but it’s certainly possible that U.S. stocks could see a drawdown as well if a trade war really heats up.
In the meantime, there are bullish opportunities for the taking, particularly in health care.
The big drug-makers and biotech firms, such as Pfizer Inc. (NYSE:PFE), Johnson & Johnson (NYSE:JNJ) and Merck & Co., Inc. (NYSE:MRK) have been showing strength relative to the rest of the market lately and look like they could be bullish candidates going forward. In general, stocks like these with the strongest balance sheets typically do the best during uncertain times.
This environment has me looking to a call-option play on Novocure Ltd (NASDAQ:NVCR), a cancer-treatment biotech with FDA-approved therapies for glioblastoma. The company also has a robust pipeline, with pre-clinical drugs in 13 different areas, two in Phase II and three more in Phase III.
Buy to open the NVCR Sep 37.50 Calls (NVCR180921C00037500) at $1.35 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.