The midterm election could decide the fate of these three health-care groups

The health-care sector is in the crosshairs this election season.

Regulatory oversight and the long-term health of the Affordable Care Act remain in question for the industry as Democrats and Republicans wrestle Tuesday over congressional leadership.

Michael Binger, president of Gradient Investments, says the midterm results could affect three health-care groups the most.

"Washington doesn't agree on much but one thing they do … agree on is that prescription drug pricing is too high so I think no matter what happens here, pharmaceutical companies will continue to have a Washington headwind that they face," Binger said Tuesday on CNBC's "Trading Nation."

Pharmaceuticals stocks have dropped over the past month, losing 3 percent, as names like Bristol-Myers Squibb, Allergan and Eli Lilly plummeted. Biotech stocks have also lagged, dropping nearly 9 percent in one month.

Whether the Democrats or Republicans hold power will also dictate the fate of the Affordable Care Act, colloquially referred to as Obamacare, and could spell trouble for two other health-care groups.

"If the Democrats win I think that's good for the hospitals, I think that's good for the insurers. If it remains red, then I think you need to look at maybe selling off these groups because I think they'll put more and more restrictions on the ACA and those insured patients will leave the system," Binger said.

Republicans had previously attempted to repeal Obamacare, an effort that failed in July 2017 when three GOP senators voted against the bill. Greater Republican representation in the House and Senate would give them a better chance of dismantling the law.

No matter the outcome of the midterms, Craig Johnson, chief market technician at Piper Jaffray, said the long-term uptrend in health-care stocks remains intact.

"When you look at the XLV, you've been making a nice series of higher highs and higher lows," Johnson said Tuesday on "Trading Nation."

"You've been seeing this particular ETF, the health-care ETF start to outperform. It has been outperforming since the May timeframe," added Johnson. "It's sending a pretty defensive message for the overall market at this point in time with a group like this performing the way that it is."

The XLV health care ETF is up 9 percent for the year to date, more than triple the gains of the S&P 500. It is one of the best S&P 500 performers in 2018.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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