Trade of the Day: AbbVie (ABBV)

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Today, we are opening a new bullish trade on AbbVie (NYSE:ABBV). Major drug-manufacturer ABBV is still trying to bounce back from the massive late-March decline it experienced when it announced it would be backing away from seeking accelerated approval for Rova-T after receiving disappointing test results on the drug, but we think it has an excellent opportunity to climb back up toward the top of the trading range it has been in since that time as healthcare spending continues to rise (it’s nearing 20% of GDP in the U.S., according to the Wall Street Journal) and as sales of ABBV’s major pharmaceuticals continue to grow.

ABBV is the proud owner of the top-selling drug in the world: Humira. In 2017, Humira raked in $18.9 billion in sales and, according to the company’s latest earnings announcement, that sales rate grew by 10% year-over-year during the second quarter. Sales of its cancer drugs are also soaring, with Imbruvica sales climbing by a whopping 35.6% year-over-year.

Wall Street is starting to pay attention to the stock again, and traders have pushed the ABBV up through down-trending resistance at ~$97 per share — completing an inverted “head-and-shoulders” bullish reversal pattern. Based on the height of this pattern and the bearish price gap that formed on March 22, we are targeting the $104 level with this trade.

Yes, the stock could climb back up toward its May high of $107.25, but, with this short-term trade in our current market environment, we believe a more conservative price target is appropriate.

Buy to open the ABBV September 21st $100 Call (ABBV180921C00100000) for a maximum price of $1.90.

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