A Technical Strategy for AbbVie as the Broader Market Gets Rocked

ABBV could bounce today but there remains the risk of a deeper correction.
Stocks quotes in this article: ABBV, AGN

AbbVie (ABBV) is the 'Stock of the Day' at Real Money. The company announced that they and Allergan  (AGN) have entered into definitive agreements to divest brazikumab (IL-23 inhibitor) and Zenpep (pancrelipase). These agreements are in conjunction with the ongoing merger process of both the companies. Despite weakness in the broader market, ABBV is trading higher in the pre-market. Let's check out the charts.

In this daily bar chart of ABBV, below, we can see that prices have weakened for much of January. ABBV made a peak in December and closed below the cresting 50-day moving average line.

The level of trading volume (histogram below the price chart) shows an increase as prices declined and the daily On-Balance-Volume (OBV) line has moved lower below the lows seen in December telling us that sellers of ABBV have become more aggressive.

The Moving Average Convergence Divergence (MACD) oscillator turned lower back in November for a take profits sell signal. This indicator is very close to crossing below the zero line for an outright sell signal. 

 
In this weekly bar chart of ABBV, below, we can see that prices and indicators have begun to weaken. Prices have turned down towards the rising 40-week moving average line.
 
The weekly OBV line shows the start of a dip in January and the MACD oscillator is close to crossing to the downside and "a take profits sell signal" on this longer time frame.  
 
 
In this Point and Figure chart of ABBV, below, we can see a potential downside price target of $76 being projected.  
 
 
Bottom-line strategy: ABBV could bounce today but there remains the risk of a deeper correction to the $78-$76 area while the broader market is under pressure. 

(AbbVie is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells ABBV? Learn more now.)

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TAGS: Investing | Markets | Stocks | Technical Analysis | Trading | Biotechnology | Pharmaceuticals | U.S. Equity | Stock of the Day

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