Medicare for All is dragging down health-care stocks and there could be more pain ahead

Health-care stocks suffered a scare this week.

The XLV health-care sector ETF tumbled more than 4% since Monday, its worst week of the year and sending the group negative for 2019.

Craig Johnson, chief market technician at Piper Jaffray, says the prognosis does not look good.

"No question that the health-care sector has caught a cold," said Johnson on CNBC's "Trading Nation" on Thursday. "The relative underperformance of about 950 basis points versus the S&P has been very painful over the last 30 days."

"When we break down the chart here, you can see a clear uptrend violation. You can see the divergence between the RSI index versus price. It looks like to us the next support comes in at $85. Failure to hold there is going to leave the next support at $74," said Johnson.

The XLV ETF, which holds companies such as Johnson & Johnson and Pfizer, ended Thursday just below $86. A move to $74 represents 14% downside from its current levels.

"We're not buying at this point in time. We're going to wait for the shakeout. We think there's more room to the downside," said Johnson.

Mark Tepper, president and CEO of Strategic Wealth Partners, says investors should hold steady in the face of increased near-term headwinds.

"Long-term I like them. Quite frankly this is all political. This is 100% a response to the possibility of Medicare for All becoming a reality which would crush the sector," Tepper said on "Trading Nation" on Thursday.

Democratic presidential candidates Bernie Sanders, Elizabeth Warren and Kamala Harris have voiced support for Medicare for All legislation that would provide universal health coverage, while President Donald Trump has pledged to address health care after the 2020 presidential election.

There are several Medicare for All proposals circulating in Congress, some of which would basically abolish private insurance while others would simply create a public option and leave private plans largely in place. Still, the industry is worried. On Tuesday, UnitedHealth CEO David Wichmann said Medicare for All would "destabilize the nation's health system."

While the industry may be worried, Tepper suggested the concerns about Medicare for All are overblown.

"I don't think Medicare for All happens so I think there's a huge opportunity here," said Tepper. "In the short run I do think there's political headwinds but as a long-term investor I think you have the opportunity to get in at a good price point now."

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