ABBV - the long expected correction may be completed

AbbVie Inc is a biopharmaceutical company that discovers, develops, manufactures and sells a range of pharmaceutical products for treating chronic autoimmune diseases, virology and neurological disorders. AbbVie Inc is a drug company with a strong exposure to immunology and oncology. The company’s top drug, Humira, represents over half of the company’s current profits. The company was spun off from Abbott in early 2013.

 It has a very profitable business with Net Margin of 33% and the whole company is traded at favorably low Price-to-Free-Cash-Flow ratio of just 11.6 times. That essentially means that the total free cash flow generated by company in 11.6 years will be equal to the whole market capitalization. Not only it is profitable. But it generates enough profit to service debts, pay dividend and incur capital investments. For example, for NVDA that ratio exceeds 30 years, for MSFT 26.5 years. So ABBV is a very profitable company with a favorable low valuation. On top of that ABBV pays dividend of over 4%!

I have been watching that stock for several months waiting until it completes a corrective move off the top at $125.86 made in January 2018. My expectation was that the stock would drop to the green target box ( see the charts below ) in the area between 84.20 and 81.48.

Below you can see two of my charts posted in April and June 2018. By the end of October 2018 it bottomed at 78.76.

Chart posted on 22 April 2018

Chart posted on 21 June 2018

I like three things about that corrective structure. First, it looks corrective and is shaped as a classic double three W-X-Y corrective pattern. Second, it hit a strong retracement ratio of 66.7%. Third, according to my micro count wave ( C ) of ( 3 ) up might still be in progress. That implies a strong rally to new all time highs. The less bullish case is that the January 2018 top should be counted as wave ( 3 ) up and the following correction as a larger wave ( 4 ) down. But even under this case we still should get a rally in the wave ( A ) of ( 5 ) up targeting the January top at $124. 

It closed at $88.79 on Friday which represents a hefty 30% discount from the price it topped in January 2018!

ABBV, Daily chart, updated on 11 November 2018