It Could Be Time For This Pharma ETF

When it comes to trading leveraged exchange traded funds, one of the keys is situational trading. What that means is that traders should identify the situations or scenarios, be they earnings reports, takeover chatter or political events, relevant to the leveraged ETFs being considered.

Adhering to situational trading can help traders do what they are supposed to do with leveraged ETFs: keep holding periods brief.

What Happened

The time could be right for the Daily Pharmaceutical & Medical Bull 3X Shares PILL. PILL attempts to deliver triple the daily returns of the Dynamic Pharmaceutical Intellidex Index (DZRTR).

That index “consists of common shares of companies that are principally engaged in research, development, manufacture, sale or distribution of pharmaceuticals and drugs of all types,” according to Direxion. “The Index may include pharmaceutical companies and other companies that facilitate the testing or regulatory approval of drugs.”

Why It's Important

PILL, which is often overlooked among leveraged healthcare ETFs, could step into the spotlight as early as Tuesday when the Senate Finance Committee holds a hearing on drug costs.

CEOs and other high-level executives from companies such as AbbVie Inc. ABBV, Johnson & Johnson JNJ, Merck & Co. MRK and Pfizer Inc. PFE, among others, are expected to appear before the committee. Those companies are all top 10 holdings in PILL's underlying index.

“Kevin Gade, a portfolio manager at Bahl & Gaynor focusing on pharmaceutical and biotech stocks, said he expects the executives to point the finger for high drug prices elsewhere in the drug-supply chain, such as at pharmacy benefit managers or insurance companies,” reports Reuters.

While congressional hearings are usually heavy on show and light substance, the Senate Finance hearings could be an ideal time for active traders to harness some volatility with PILL, which enters Tuesday higher by almost 19 percent this year.

What's Next

If there are positive surprises out of Tuesday's hearings, PILL could rally as the healthcare sector shed's its laggard status in 2019. Last year, the sector was the best-performing group in the S&P 500.

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