AbbVie Inc. discovers, develops, manufactures, and sells pharmaceutical products worldwide. The company’s products include HUMIRA, a therapy administered as an injection for autoimmune diseases; IMBRUVICA, an oral therapy for treating chronic lymphocytic leukemia; and VIEKIRA PAK, an interferon-free therapy to treat adults with genotype 1 chronic hepatitis C.
Take a look at the 1-year chart of AbbVie (NYSE: ABBV) below with my added notations:
ABBV has created a common chart pattern known as a triangle. Combining a down trending resistance (red) with an up trending support (green) forms the triangle pattern. As the support and resistance converge on each other, the pattern is created. Since there is no true way to know which way the stock will break, most traders will wait for the breakout or breakdown before entering a trade.
The Tale of the Tape: ABBV has formed a symmetrical triangle. A trader could enter a long position on a break above the down trending resistance with a stop set under the entry level. However, if ABBV were to break below the trend line support, a short trade could be entered with a stop above the trend line.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT