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.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are prohibited from trading individual securities.

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

More from Investing

Bearish Bets: 2 Nasdaq Stocks You Really Should Consider Shorting This Week

Bob Lang

These recently downgraded names are displaying both quantitative and technical deterioration.

I Have My Designs on This Options Trade Monday

Bret Jensen

Options on this retail name are liquid and provide a more-than-adequate return even if the stock does nothing over the term of the trade.

The 3 Primary Obstacles to Trading Success

James "Rev Shark" DePorre

How you deal with each of these issues will determine your level of profits.

Intel's Earnings and Guidance Feature More Good News Than Bad for Chip Stocks

Eric Jhonsa

There are reasons why AMD and many chip equipment stocks closed higher on Friday, even as Intel's shares tumbled.

Fed Gives a Reason to Sell, and Some Stocks SNAP Under Pressure

James "Rev Shark" DePorre

But by day's end many names rebounded, even if the S&P 500 finished with a small loss that broke its winning streak.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight