AbbVie Shares Look Set to Tackle the Century Level

The consolidation pattern in the $90-$95 area over the past three months by drug stock AbbVie (ABBV) appears very similar to that of June through July (in the $70-$75 area), which was followed by a rapid 30% rally.

Reasons to believe the most recent consolidation has been completed include: support that manifested at the 50-day moving average on a pullback earlier this month; ongoing "micro-moves" to all-time highs this month after the Oct. 20 peak had stood unchallenged for six weeks; and renewed 20-day Relative Momentum Index (RMI) buy signals following recent short-term pullbacks (see chart).

Moves past the $100 century mark can be a challenge, and this is also the site of triple the initial lows after the ABBV spin-off from Abbott Labs. But the robust technicals (including a strong pattern of higher lows on pullbacks) is likely to resolve with another burst to the upside. Plus, there is plenty of room for a boost in call option speculation to drive the shares past resistance, with call open interest currently in the 16th percentile (per Trade-Alert) and less than half the peak levels of May 2017.

Our recommended call option triples on a move to the $110 area -- site of double the October 2016 low. In the meantime, we expect pullbacks to be contained at the rising 50-day moving average.