Conclusion, Investment Implications, Strategy
Abbott Laboratories’ (ABT) breakdown from 2 months of sideways investor indecision suggests that a Strategic top is in place at the Aug 28th high and targets a 10% decline to $94.00 per share that will remain valid below $107.41. Due to ABT’s statistically significant and stable positive correlation to the S&P 500 throughout the past 40 years, an upcoming decline in ABT is seen as also being indirectly negative for the US broad market.
Analysis and Rationale
Abbott Laboratories (ABT) discovers, develops, manufactures, and sells health care products worldwide. The company was founded in 1888 and is headquartered in North Chicago, Illinois.
Chart 1 below plots ABT daily since June, highlighting an emerging breakdown from 2 months of sideways investor indecision. This breakdown suggests that a Strategic top is in place at the Aug 28th high and targets a 10% decline to $94.00 per share that will remain valid below the lower boundary of the indecision area, currently at $106.30.
Chart 1
Note that a decline to $94.00 would equate to a test of major underlying support at the 200-day moving average.
Table 1 below shows that considering the aforementioned downside target and a protective stop placed above the $107.41 area, a short entry price of $104.57 would provide a 1:3.7 risk/reward ratio (risking $1.00 to make $3.70) with an initial risk of 2.7%.
Table 1
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Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.