The Illinois-based global healthcare company that conducts innovative research and manufactures products for human health through every life stage, Abbott Laboratories (NYSE: ABT) seems to be getting ready for a price surge according to its latest charts.
#1 Falling Wedge Support: ABT’s daily chart shows that the stock has currently taken support at the bottom of a falling wedge pattern. This pattern and is marked in the chart in orange lines. The stock has historically taken support near the bottom of falling wedge pattern before moving higher again.
#2 Bullish Candle: The latest candlestick pattern in the daily chart is a hammer. This usually signals the reversal of the downward trend.
#3 RSI nearing Oversold: In the daily chart, the RSI is moving up from near oversold levels. This implies that a possible reversal is around the corner.
#4 Support Levels Nearby: The stock is currently trading near support levels. There is a long-term resistance turned support nearby (marked as pink dotted lines).[hana-code-insert name=’adsense-article’ /]Earlier, the stock had broken out of the resistance level after weeks of consolidation (marked as the blue rectangle).
Currently, the stock is retesting these levels. The 200-day SMA is also close by.
#5 Double Bottom: The stock is currently forming a double bottom pattern.
This is marked in purple color.
A double bottom is a bullish pattern and a breakout from this pattern may lead to an upmove in the short term.
#6 Stochastic %K above %D: The %K (blue) line of stochastic has crossed over the %D (Orange) line. This cross called as a signal line cross is usually an indication of the reversal of the current downtrend.
#7 Uptrend Unbroken: As you can see from the weekly chart of ABT, the stock’s uptrend is still unbroken as the stock has been forming higher highs and higher lows.
#8 CCI nearing -100: The weekly chart of ABT shows that the Commodity Channel Index (CCI) is currently moving nearing -100. Once the cross below -100 happens, CCI would be oversold and can lead to a possible price reversal.
#9 Above MAs: The weekly chart shows that the stock is currently trading above both 50-week as well as 200-week SMA. This implies that the uptrend is still quite strong.
#10 Pennant Pattern: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic pennant pattern and is marked in the chart in blue color. Currently, the stock is trading near the lower end of the pennant. A pennant is a continuation pattern. Whenever a stock breaks out of the pennant pattern, it typically continues its previous trend (uptrend in this case).
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can buy the shares of ABT at the current price of $57.93.
TP: Our target prices are $75 and $85 in the next 4-6 months.
SL: To limit risk, place a stop loss below $54.50. Note that this stop loss is on a closing basis.
The target potential upside for this trade is nearly 29% to 47% in the next 4-6 months. For a risk of $3.43, the target rewards are $17.07 and $27.07. This is a nearly 1:5 and 1:8 risk-reward trade, which means that this trade offers nearly 5X to 8X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the falling wedge pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
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