ABBV - A Good Value After Pullback
I'm buying ABBV here as prices have retraced to notable trend support. There are a few confirming factors that suggest it is ready to resume higher.
The stock responded off the March lows along with the broad market. It has since pulled back to the rising 20 Month SMA for the first time since ABBV underwent a 2-year Bear Market.
When a stock has corrected for 4-months, the vast majority of "enthusiasm" has been extinguished. Yet on this higher timeframe it is simply resetting to the trend average. Shorter-term traders that chased the upside off the lows are now shaken out and sentiment is back to a more neutral posture.
I treat these reset type pullbacks as strong "value" areas for entries.
It is common after a strong rally for price to retrace roughly 50% of the prior uptrend; as I like to call this "two steps up and one step back". This happens on all timeframes and when I see it happening on a larger timeframe I get excited by the prospect of buying into the pullback.
Zooming in a bit on the correction it appears price has formed out a 5-wave sequence. During Monday's broad market selloff note that ABBV did not make a lower low and in fact closed well off the lows of the session. This to me suggests price may have exhausted on the downside.
So many traders focus too much attention on short-term and Daily charts. This "zoomed in" view can miss the bigger picture. Despite the notable correction in the stock over the last few months, don't lose sight that this is not a downtrending stock. The Quarterly chart is always a good reference to keep in mind and shows the long-term performance since its spin-off from ABT.
Throw in the 5.6% Dividend Yield and this is offering a very favorable risk/reward. I will be using a -10% Hard Stop from my entry point here to exit and reassess.
I have added shares for personal and Client accounts, as well as some January $100 Call options for trading accounts.