Conclusion, Investment Implications, Strategy

Health Care stock AmerisourceBergen Corp (ABC) is currently testing major underlying support near $138.65 amid monthly oversold conditions, setting up a potential low risk buying opportunity.  A sustained rise above this support area would target a 15% rise to $164.61.  This is an Asbury Value idea.

Analysis and Rationale

AmerisourceBergen Corporation (ABC) sources and distributes pharmaceutical products in the United States and internationally. Its Pharmaceutical Distribution segment distributes brand-name and generic pharmaceuticals, over-the-counter healthcare products, home healthcare supplies and equipment, and related services to various healthcare providers, including acute care hospitals and health systems, independent and chain retail pharmacies, mail-order pharmacies, medical clinics, long-term care, and alternate site pharmacies, and other customers.  AmerisourceBergen Corporation was incorporated in 2001 and is headquartered in Conshohocken, Pennsylvania.

The upper panel of Chart 1 below plots ABC daily since September 2021 along with its 200-day moving average, a widely-watched major trend proxy currently at $138.65 which the stock is currently testing.  The lower panel plots monthly overbought/oversold conditions according to the 21-day (monthly) Stochastic oscillator.  The green highlights show that ABCM is currently rising out of monthly oversold extremes, and that previous instances of this coincided with Tactical or Strategic bottoms on May 3rd and on Dec 1st and Oct 4th 2021. 

These conditions suggest another similar low-risk buying opportunity now.

Chart 1

Risk/Reward

Table 1 below shows that considering a $164.61 upside target with a protective stop placed below the $138.24 area, a long entry price of $143.18 would provide a 1:4.3 risk/reward ratio (risking $1.00 to make $4.30) with an initial risk of 3.5%.

Table 1


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