AbbVie Is a Buy as Allergan Deal Closes - A Look at the Charts

AbbVie is rallying now that the company has closed its mega-deal with Allergan. The stock is looking to possibly test 2020 highs.
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AbbVie  (ABBV) - Get Report has been trading well lately, up 4% on Tuesday after Monday’s 4.7% gain.

AbbVie shares were moving nicely last week, but came under pressure on Thursday and Friday. Ultimately, the company's acquisition of Allergan  (AGN) - Get Report closed on Friday and AbbVie stock has been doing well since. 

And why shouldn’t it be? Shares pay out a 5.4% dividend yield and the business now has a stronger and more diverse lineup.

On Monday, two analysts came out with positive commentary and outperform ratings. Morgan Stanley used a $95 price target, while SVP Leerink sees a move up to $122. The latter is bullish on AbbVie’s long-term free cash flow potential.

Let’s look at the charts to get a better idea of AbbVie stock.

Trading AbbVie

Daily chart of AbbVie stock.

Daily chart of AbbVie stock.

A look at the daily chart above highlights the powerful two-day move we discussed above.

Friday was a discouraging day for AbbVie stock, but shares posted a solid bounce off the rising 20-day moving average. That led to a gap-up on Monday, where shares rallied right into the $88 level.

This mark is significant for several reasons. First, it’s a level of resistance dating back to November. Second, this was the prior week’s high and a move over it allows for a weekly rotation higher. 

While not as strong as the prior points, the prior week’s high was also above the prior month’s high. In other words, bulls are looking at a weekly and monthly rotation, as well as a move over prior resistance.

At the very least, it sets the stages for a modest move higher. However, it could be the start of a larger move back to the 2020 highs near $97.

If AbbVie stock can clear $92 and close above this mark, a move back to the mid-$90s is on the table, with the 2020 highs and $100 acting as potential upside targets.

On the downside now, investors will want to see $88 act as support. Below puts the 20-day moving average in play, as well as prior uptrend support (blue line). As long as the overall market holds up though, it looks like investors are willing to bid AbbVie higher now that it’s closed the deal with Allergan.