Biotechnology and pharmaceutical companies have been quickly cycling through overbought and oversold. The problem has been so problematic that Sorrento Therapeutics had to specifically claim they were not a “pump and dump” scheme. Any whisper of a "cure" for Covid-19 has investors rushing to the entrance and quickly fleeing after results are what they had expected (an image of people rushing toward the exit and getting stuck in door comes to my mind). People who know the biotech sector have been cautiously watching the spectacle and trying to avoid getting trampled in a stampede. To be clear: your average investor is getting burned in the vaccine-hunt game.
AbbVie "ABBV" is (and has been) a reliable pharmaceutical and biotechnology company for some time. The company is known for its generous dividend – previously at a yield of 5.20%. The company has a robust balance sheet with a Quick Ratio of 3.03 and a Current Ratio of 3.14. In the world of biotech, research and development is everything. ABBV pipeline is stacked with potential drug candidates many of which are in Phase 3 of development according to AbbVie’s investor relations brochure.
From a technical analysis standpoint, the moving averages appear to be moving toward a positive crossover – EMA10 = 91.00, EMA20 = 90.88 EMA25 = 90.87. The stock does not look overbought or oversold according to the Stoch RSI and Money Flow Indicator. However, the MACD indicator shows that there may be a further swing downward before moving into positive territory. Finally, the linear regression model is one of the few biotechnology companies that is not inverse or appears caught in a sideway pattern.
One of my big regrets right here. I'll definitely be scooping this up late June/early July.
That recent ABIO FOMO was a fun ride up, banked a 100% profit in a couple months with spare shares long, already rebuying again for the next FOMO haha.
Biotech is fun, haven't even tapped into that on TView yet, been so caught up in SPX and TVIX.
luminaryfi
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@ProfitHarvest, Thanks! AbbVie is a solid stock choice long-term. Even if it does drop with the rest of the market in another sell-off its still has a nice set-up for growth. If you're a dividend hunter - you can't beat ABBV's average about 5%. I have an updated chart - I've been playing around with them to see what looks best visually and so its bright enough I don't miss signals even if I'm just glancing at them.
ProfitHarvest
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@luminaryfi, Damn man love it. So much more cool than mine haha.
Absolutely, long term it's gonna crush it plus the great dividend, makes it hard to beat.
Other great dividend stocks... NOK and some banks, RF, FHN, PPBI and PNC.
huskerfan50
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Thanks for the thoughtful analysis. Been in ABBV for a few months and based on fundamentals it seems we will be going higher but the price action the last week and a half has been odd. I thought the momentum from last Friday would continue but it stopped dead. I am still pretty new to more hands on investing so your analysis is helpful.
luminaryfi
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@huskerfan50, Yeah that’s a great idea to always start with fundamentals on any type of stock or etf. From what I’ve learned fundamental analysis helps you narrow the companies you want to invest in, then technical analysis helps you with accurate timing.
I’m way more of a quant-type with a background in science and stating, so I try to blend as much financial theory in with that basis. That’s why one of my favorite indicators is linear regression. It’s built in sound statistical and mathematical theory (I know you have to make the assumption that you’re working with a normal Gaussian distribution- it’s not perfect), and it is widely used in trading algorithms.
If you look at the second chart, you are comparing two variables - the price of the stock and time. If you see that the middle red line in the middle it’s the mean/average, the outer bands are the different standard deviations. The theory in finance is that stock prices revert back to the mean.
If you see that the stock is in the red bands, it’s an indication to buy - because we assume that the price will go back toward the average. The main problem with this indicator is that this usually just works when the overall condition of the market is normal and stable. Large events like COVID or specific events like Trade Tariffs hitting a particular company can throw this pattern off significantly and hit from nowhere.
huskerfan50
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@luminaryfi, That is extremely helpful. Thanks again for taking the time to respond. Beautiful charts!
One of my big regrets right here. I'll definitely be scooping this up late June/early July.
That recent ABIO FOMO was a fun ride up, banked a 100% profit in a couple months with spare shares long, already rebuying again for the next FOMO haha.
Biotech is fun, haven't even tapped into that on TView yet, been so caught up in SPX and TVIX.