Special Report: Avoid These Two Healthcare Stocks

Healthcare stocks ABBV and TDOC are encountering trouble on the charts

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Last month was a doozy for investors. We've discussed how investors can manage September seasonality ad nauseam, but what about the other side of the coin? What stocks out there could fall victim to the seasonal doldrums, or are staring up at daunting technical ceilings? The trading experts at Schaeffer's Investment Research compiled an "8 Stocks to Sell Now" report to highlight eight such stocks, including two from the healthcare sector. Click here to view the entirety of the special report.

AbbVie Could Encounter FDA Headwinds

Drugmaker AbbVie Inc (NYSE:ABBV) recently broke below the $200 billion market cap level and is now on the verge of breaching its year-to-date breakeven level. Since 2016, once large bearish trends stop at -10%, they typically don't bounce until at least a -20% pullback. One of these occurred with ABBV, after a recent Food and Drug Administration (FDA) announcement requiring warnings about an increased risk of serious heart-related events, cancer, blood clots, and death for JAK inhibitors that treat certain chronic inflammatory conditions - specifically for ABBV’s arthritis drug Rinvoq.

ABBV

Keep an eye on $100 as a potential bounce level. But if that breaks, ABBV could easily fall into the low $90's before finding a bottom. Considering not a single analyst rates the stock a "sell" and short interest accounts for less than 1% of ABBV's float, there isn't much sideline cash that can fuel additional upside.

Yet at the same time, call buyers are becoming aggressively long, thinking the bottom is already in. This is evident by ABBV'S 50-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 3.68, that sits higher than 86% of readings from the past year.

Our bearish thesis would stop out above ABBV's 160-day moving average at about $113, which is also slightly above that aforementioned $200 billion market cap. 

Teladoc Health at Downgrade Risk

Teladoc Health Inc (NYSE:TDOC) has struggled in the wake of the Covid-19 pandemic, despite being a popular name among virtual healthcare solutions. In fact, the company failed to receive a bid during one of the several pandemic peaks, but continues to underwhelm.

TDOC

Now in negative territory year-over-year and year-to-date, it’s no surprise the equity is ripe for downgrades among the brokerage bunch. In fact, of the 17 analysts in coverage, nine sport a "buy" or "strong buy" recommendation. In other words, an unwinding of this pessimism could act as a headwind for the shares. 

 

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