Trading AbbVie as Its Drug Is Seen as Possible Coronavirus Treatment

AbbVie is rallying Monday as the company divests assets to get approval for its Allergan deal and as the company tries to help treat the coronavirus.
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Most of the market is under selling pressure Monday, but not AbbVie  (ABBV) - Get Report.

Shares have come off the highs of the day but were still up 1.2% on Monday. As the world frets about tension in the Middle East and the spreading coronavirus in China, AbbVie shares are pushing higher on the hope that it may have a solution for the deadly virus.

The company has two drugs that are being used by China to try and help with the outbreak. Plus, its M&A target Allergan  (AGN) - Get Report just divested a drug, while AbbVie sold an experimental Crohn’s treatment to help push the merger through.

The fact that AbbVie is up on the day and not down is reason enough for Real Money to name it the Stock of the Day.

A look at the chart shows some concern among the technicals, but again it’s holding up much better than many other names out there. Let’s look at the chart.

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Trading AbbVie Stock

Weekly chart of AbbVie stock. 

Weekly chart of AbbVie stock. 

AbbVie has undergone a robust rally from the summer lows, ripping from a low near $61 to a high near $91. That’s about a 50% move in less than six months, and AbbVie stock was doing a good job consolidating the big run up.

In fact, it was forming an ascending triangle (blue lines), a bullish technical development. That occurs when rising uptrend support squeezes the share price against a static level of resistance. In this case, resistance came into play near $90, as this pattern played out over multiple weeks.

In the end, the bulls didn't win, as shares actually broke below support. However, the silver lining is that we now have some levels to keep an eye on as a result.

Right now, AbbVie is hanging around its 10-week moving average near $85. A move lower that takes out last week’s low of $82.76 puts the $80 mark on the table. This level has played a notable role as both support and resistance over the past few years.

This would represent a reasonable risk/reward dip-buying opportunity for bulls looking for a rebound. 

To get there, it would require a decline of roughly $5 per share. On the flip side, a $5 per share rally would send ABBV stock to $90. If the stock is able to breakout over this mark and clear its December high of $90.76, then it puts the $100 mark on the table.

So that is the rough range we’re trading right now. Currently near $85, let’s either wait for a pullback down toward $80 or a breakout over $90. Subsequently, longer term investors may consider buying a partial position near $85 and adding on either of the first two scenarios playing out.

As always though, use an appropriate stop-loss to prevent the position going from a small loss to a large one.