Indicators in favour of the bulls, but caution should remain on price positioning

Taking a look at AbbVie ahead of its earnings tomorrow. Yesterday, the pharma giant’s stock closed at $173.12 a share. Based on the weekly chart, we can see that from a technical aspect, the price sits within a neutral position right ahead of the earnings. This creates a higher risk to reward in the near term. The next resistance level reads around $175.90 followed by the all-time high of $182.29. Failure to move above $176 could ignite a sell-off towards the lower trendline of the channel drawn on the chart. Even though the stock has found a new support level at $153.57, this may not be enough to withstand any selling pressure with the current market sentiment. A break below $153.57 post earnings would likely see a move towards the trendline support of around $149.36. A fall below the trendline would then increase the likelihood of a deeper retracement towards last year’s lows of $136-$137, implying a 20% decline. However, a beat in the earnings may provide some fundamental support, either reducing any volatility due to the market sentiment or leading to a bump in price. A move above $182.57 in the coming weeks could spark a rally towards the psychological resistance along the upper trendline, or respectively, $205-$208. Potential upside of 19-20%. The technical indicators are more in favour of the bulls but as seen during this earnings season already, fundamentals have more of an influence on price the technical indicators.