July 19, 2024

Here’s a ‘solid contrarian idea’ for 2024, according to BTIG’s Krinsky

0


Some technical analysts with a bearish bent also recognize the runes look favorable for the S&P 500 following the latest surge. For example BTIG’s Jonathan Krinsky says the benchmark index may challenge 5,000 early n 2024.

But let’s not get carried away. Krinsky adds he doesn’t see another big upside move much beyond that level and if the tide turns he warily eyes initial support at 4,600, and with 4,200-4,300 as major long-term support.

Furthermore, he spies some concerning issues, such as an uptick in the CBOE VIX index

before the Christmas break, even as the market gained ground.

The VIX, an option-based gauge of expected S&P 500 volatility, tends to fall when the market goes up, so its rise may indicate some wariness bubbling below the surface.

It’s a scenario similar to the market shakeouts witnessed in January 2018 and September 2020, Krinsky notes, and comes as broad market sentiment is chipper with investors’ “positioning back near multi-year highs.”


Source: BTIG

With this in mind, Krinsky appears wary of chasing sectors of the market that have already been big winners and has his sights on a sector he considers “a solid contrarian idea”: healthcare.

As the chart below shows, the healthcare sector has meandered within a trading range for about two and a half years.

“An upside resolution from this range in ’24 could be powerful and would suggest relative outperformance after testing 2021 lows,” says Krinsky. “HC has only been the best performing sector in a year once over the last 15 years (2018), and while we can’t say it will be the best in 2024, we do think it is worth a strong look for relative outperformance.”

Source: BTIG

Within the sector, Krinksy notes that smaller companies, as represented by the Invesco S&P SmallCap Health Care ETF
,
has begun to break a nearly three-year downtrend relative to bigger companies, the Health Care Select Sector SPDR ETF
.

“Much like the broad market, we expect small-cap [to do better than] large-cap initially in ’24,” he says.

Those large-cap companies with what Krinsky considers are “constructive” charts but for which they do not have a rating include: AbbVie
ABBV,
Danaher
DHR,
IQVIA
IQV,
and Laboratory Corp. of America
LH.

Small-caps with constructive charts and no BTIG rating include: Alkermes
ALKS,
Ensign
ENSG,
Fortrea
FTRE,
and Integer
ITGR.

Source: BTIG

Companies with constructive charts and a BTIG buy rating include in Biotech: Ambrix Biopharma
AMAM,
Apogee Therapeutics
APGE,
Biohaven
BHVN,
and Exelixis
EXEL.

In MedTech: Abbott Laboratories
ABT,
Boston Scientific
BSX,
Inari Medical 
NARI,
and Stryker
SYK.
In Life Sciences: Castle Biosciences
CSTL,
Natera
NTRA,
NeoGenomics
NEO,
and SOPHiA GENETICS
SOPH.

In IT & Digital Health: Apollo Medical 
AMEH,
Progyny
PGNY,
Sharecare
SHCR,
and Simulations Plus
SLP.

Finally, Krinsky looked at two of the best known healthcare companies: Pfizer
PFE
and Eli Lilly
LLY.
Pfizer has had a rotten 2023, down 44% and in danger of falling for eight months in a row.

However, it’s share price is now in an area offering what Krinsky considers is “major support” and “while it’s not in the Dow any longer, if looking for a contrarian idea similar to the ‘Dogs of the Dow’, this one fits the bill.

Eli Lilly on the other hand doesn’t look promising from a technical perspective, says Krinsky: “The stock is up seven years in a row and 12 of the last 13. Feels a bit parabolic lately with weekly momentum rolling over as the stock breaks its medium-term uptrend.”

Markets

U.S. stock-index futures
ES00

YM00

NQ00
are mixed as benchmark Treasury yields

nudge higher. The dollar

is softer, while oil prices
CL
dip and gold
GC00
trades above $2,075 an ounce.

Key asset performance

Last

5d

1m

YTD

1y

S&P 500

4,781.58

1.77%

5.08%

24.54%

26.39%

Nasdaq Composite

15,099.18

2.17%

5.90%

44.26%

47.84%

10 year Treasury

3.819

-6.80

-51.39

-6.03

-0.10

Gold

2,087.30

1.44%

1.52%

14.05%

14.57%

Oil

73.67

-0.35%

-2.57%

-8.50%

-6.40%

Data: MarketWatch. Treasury yields change expressed in basis points

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The buzz

U.S. economic data due on Thursday include the weekly initial jobless benefit claims report, alongside November readings of the trade balance in goods, retail and wholesale inventories, all published at 8:30 a.m. Eastern.

Pending home sales for November will be released at 10 a.m.

Apple
AAPL
is resuming sales of its smartwatches after court pauses FTC import ban.

The U.S. Treasury will auction $40 billion of 7-year notes at 1 p.m.

The Japanese yen
USDJPY
approached the 140 to the dollar level as investors eyed a shift to tighter policy by the Bank of Japan in 2024 and the cutting of interest rates by the Federal Reserve.

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Source: Evercore ISI

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