The best-performing sector last year could be the top bet for 2019, technician says

Health-care stocks did not just survive a volatile 2018. They thrived.

The S&P 500 sector ended the year up 4 percent, the only positive area of the market, while components of the XLV health-care ETF such as Eli Lilly, Merck and Pfizer ended with double-digit gains.

The party might not be over yet, the sector should continue to be a solid play for 2019, too, according to Craig Johnson, chief market technician at Piper Jaffray.

"I think you let the winners run," Johnson said Monday on CNBC's "Trading Nation." "If you look at a chart of the XLV, you can see that we pulled right back to the support area on the February lows. We never broke it. Many other sectors and the market in its entirety broke below those February lows but right here we're not seeing it."

The health-care ETF bounced off support at around $80 earlier in December, but did not break below its February and April lows. It is still in a correction down about 11 percent from its 52-week high.

"Two stocks that have caught our attention inside the health-care sector would be Medtronic, pulling back to a big identifiable support, and also Tandem which is also a name that has pulled right back to the rising 200-day moving average," Johnson said. "Those are names that we would be buying in here now and we'd stick with the health-care trade."

Gina Sanchez, CEO of Chantico Global, is also bullish on the health-care sector in the new year.

"You want to get into defensive sectors for 2019 and health care definitely fits that bill," Sanchez said Monday on "Trading Nation." "There are segments of health care that are actually going to be growing next year, segments like biotech and, quite frankly, digital health care."

Defensive plays, such as health care, are considered safer bets in a shrinking economic environment where demand for their goods and services are less affected. Health care, alongside other defensive sectors such as utilities and REITs, typically offer a dividend and consistent growth.

"We think you should stick with something like health care for 2019," added Sanchez.


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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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