The market is now apparently well aware what to do with tariffs – sell everything and ask questions later.
And now that we’ve seen major outflows and risk reduction, the market seems to be starting the process of deciding what should not have been sold. To get there, there is a need for value investors to have cash to invest and confidence in the timing of the investment.
So, let’s review the broad market and see just what might indicate some real confidence in that timing for investors in the S&P 500:
To be brutally honest here, the market isn’t showing many good signs, but Monday and Tuesday morning were a start. But the rally on Monday morning after opening down significantly was broadly negated by mid-day. And the rally in the markets overnight on Monday and into Tuesday morning again showed a fairly traditional bear market bounce that had the chance to turn into a bottom, but the markets sold off throughout the day only to close in the red. What does this mean? Someone’s trying to buy this market, but the buyers are being met by sellers that have more to sell than the amount of money interested in buying this market. For now, at least.
Rather than list off any one of the thousands of bearish stocks in this market, I’d like to try to find a diamond in the rough for the bull. Perhaps this stock will also end up going to new lows, but there are reasons for optimism if I can find a stock with a fundamental backdrop that is bullish in spite of tariffs.
I think I may have found just that in the healthcare sector. Medicaid and Medicare negotiations are ongoing in the government, but tariffs are dominating the new, so it may have been easy to miss that a few stocks, such as Humana (HUM) and United Healthcare (UNH) had incredibly bullish days on Tuesday:
But after a move like that, I struggle to chase the move. There’s another stock that has some bullish input from the Medicaid conversation, and as a result got an upgrade from Jefferies on Tuesday. While it had a strong start to the day, the market’s selling brought it back near unchanged by the close, and that looks like a potential buying opportunity to me. That stock is Centene (CNC):
CNC is trying to go up, and if it weren’t for the massive drop in the broad market, it seems that it would have no problem doing so. But, when traders want to buy basically nothing and sell basically everything, these diamonds in the rough can get caught up in the market behavior. To get some confirmation, I checked my AI signals for short-term price behavior predictions and see strong projections for bullish behavior in the coming days. While this is certainly a market that’s difficult to predict, the AI confirmation to my view of the way the market is treating CNC gives me added confidence in a short-term bullish trade, and as a result, I’m looking at bullish options structures to define my risk and leverage my upside if I’m right.
If you want to learn more about utilizing AI for predicting dynamic markets and the incredible opportunities that can be captured utilizing state-of-the-art technological advancements in trade recognition, just send me an e-mail and I’m happy to talk through the leveraged opportunities that I’ve historically identified by combining AI and options analytics!
And as always, please go to http://optionhotline.com to review how I traditionally apply artificial intelligence, technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@OptionHotline.com
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