When it comes to macro-level trends set to make a massive impact on the financial markets, aging populations around the globe are near the top of the list. This one factor will have widespread influence on risk tolerance, asset allocation, and personal goals outside of investing, which will likely be some of the largest catalysts for change in the coming decades.
Parallel to these factors is the underlying health and wellbeing of these investors, which will also coincide with increased demand on the global health care sector for years to come. In this article, we'll take a look at three charts suggesting that now could be an ideal time to increase exposure to this important segment of the financial markets.
iShares Global Healthcare ETF (IXJ)
One of the most popular exchange-traded funds utilized by investors looking to gain exposure to health care stocks from a global perspective is the iShares Global Healthcare ETF (IXJ). This fund, as the name suggests, holds positions in pharmaceutical giants, biotech, and medical device companies from around the world.
Taking a look at the multi-year weekly chart below, you can see that a well-defined symmetrical triangle has formed. The bullish price action over the past couple of weeks has sent the fund above the resistance, and the breakout now suggests that target prices will be set near $71, which is equal to entry point plus the height of the pattern. From a risk management perspective, stop-loss orders will most likely be placed below the lower trendline in case of a major shift in the underlying fundamentals.
Johnson & Johnson (JNJ)
One of the world's largest healthcare stocks is Johnson & Johnson (JNJ), which has 135,000 employees who serve more than 1 billion patients each day. The company has key positions in the consumer, pharmaceutical, and medical device segments. In fact, the company has 26 platforms/products with over $1 billion in 2018 sales.
Taking a look at the weekly chart below, you can see that the price is trading with an established channel pattern. The eight-year chart clearly highlights where traders will look to place their buy and sell orders. Based on the recent pullback toward the lower trendline, it appears as though now could be the time that followers of technical analysis will be looking to buy because the stock is offering a risk-to-reward ratio that is only seen once in every couple of years. Stop-loss orders will most likely be placed below either the 50-week ($134.13) or 200-week ($118.10) moving average, depending on risk tolerance.
Abbott Laboratories (ABT)
Another world-leading health care stock that is a favorite of active traders is Abbott Laboratories (ABT). Founded in 1888, the company is a leader in discovering, developing, manufacturing, and selling health-related products across the globe.
Taking a look at the weekly chart, you'll notice that the stock is trading within a confined upward-sloping trading range and is showing little signs of reversing. As discussed above, traders will likely look to add a position as close to the lower trendline as possible and place stop-losses below the long-term weekly averages, depending on their investment horizon and risk tolerance.
The Bottom Line
The underlying changes in global demographics are setting up one of the strongest macro-level investment themes of all time. While the weekly charts clearly show that the bulls are in control of the momentum, the patterns aren't showing any signs of slowing down or reversing. Clearly identified trendlines are also creating lucrative risk-to-reward scenarios for those who follow technical analysis, marking clear levels for the placement of buy and stop orders.
At the time of writing, Casey Murphy did not own a position in any of the securities mentioned.