AbbVie Inc.: Focus On the Options of Pharmaceutical Champions

AbbVie Inc. (NYSE:ABBV) is the target of our options trading activities this week as we start with fresh coverage on the options of pharmaceutical companies. AbbVie Inc. is a large cap pharma stock with a market capitalization of $98.71 billion as at market close last Friday.

AbbVie is a global research-based pharmaceuticals company. The Company’s products are used to treat chronic autoimmune diseases, including rheumatoid arthritis, psoriasis, and Crohn’s disease; human immunodeficiency virus (HIV); endometriosis; thyroid disease; Parkinson’s disease, and complications associated with chronic kidney disease and cystic fibrosis, among other health conditions, such as low testosterone.

Interesting Chart Pattern

AbbVie closed with 2.79% gains at $62 per share last Friday to mark 5 consistent (1 week) days of trading gains. The chart below shows how the shares of AbbVie have traded within the last one year.

ABBV Chart

The shares of AbbVie have recorded a decent recent rally in the first 8 months of the last one year as shown in the blue arrow. However, the stock has entered a pullback in the last four months as shown in the black arrow.

Interestingly, the end of the pullback has the shares of AbbVie trading in a channel marked by a $54.60 support level and a $60 resistance point. The key support levels and key resistance points of AbbVie are indicated by the purple and red circles. You will notice that the shares of AbbVie have rebounded in the last two times that the share price touched that $54.60 support and you’ll also notice that the share price has fallen in the last two times the stock touched that $60 resistance.

However, the shares of AbbVie are up above that $60 resistance again as evident in last Friday’s $62 closing price. It remains to be seen if AbbVie will breakout above $60 for good or if the stock will crash towards a $54 trading price once again.

Claims in Support of a Breakout

  • Earnings on the Horizon

AbbVie is expected to release its first quarter (Q1 2015) earnings on April 23 and the possibility that Abbvie’s first quarter earnings will push the stock to a new trading range is high. For instance, AbbVie has consistently beaten consensus estimates in the last four quarters (fiscal 2014) and the stock has beaten estimates in 7 out of the last eight quarters. Analysts are expecting AbbVie to report earnings of $0.84 per share to mark a 16.87% year-over-year increase.

  • Attractive to Investors

AbbVie is constantly in the news; hence, I am not surprised to see that the stock has a Zacks Number 3 rank and a “Hold” rating. An interesting point to note is that AbbVie has a Zacks Style Score of “A” on momentum, which suggests that we can expect the buying action to increase on the whiff of any good news from the company.

One of the things that make AbbVie attractive to investors is its strong product portfolio that contains one of the top drugs in the world in terms of sale – Humira. AbbVie distributes Humira in the United States, European Union, Mexico and Canada and the drug has been a major contributor to AbbVie’s revenue – Humira contributed $12.53B to AbbVie’s revenue in fiscal 2014 after growing at a 3-year-CAGR of 16%. AbbVie’s patent on Humira is set to expire in the United States in late 2016 and it will expire in 2018 in the EU. Hence, investors will still be able to milk out additional gains from AbbVie.

How to Trade ABBV Options

As options trading activities begin this week, I want to open my trades with ABBV call options. You should consider buying the ABBV Aug 2015 60.000 call (ABBV150821C00060000) at an asking price of $4.50.

— Daily Option Alerts

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