Drug stock ABBV rarely finishes January in positive territory
As we say welcome in the New Year with cautious optimism, it’s important to note not just the best stock picks to bet on, but also the ones to avoid. Historically, there are a notable amount of names that tend to underperform the broader market in the month of January, and Schaeffer’s Senior Quantitative Analyst Rocky White has pulled the 25 worst to give a head start on how to keep your trading portfolio clean of any misses to start the year.
Taking the trophy for the worst stock on the S&P 500 Index (SPX) to own in January, historically, is pharmaceutical concern AbbVie Inc (NASDAQ:ABBV). Per White, over the last 10 years, ABBV stock carries the worst average return, negative 6.78%. Just two out of 10 returns have moved positive, and a move of similar magnitude from Thursday’s close of $135.93, would put AbbVie stock just below $127.
On the charts, ABBV has been running within record-high territory over the past few months but is now stalling out near $135, which could mean the equity has hit a top. In fact, the drug therapy name is sitting flat on the week despite Thursday hitting a record high of $136.83, further underscoring possible technical weakness.
Also supporting White’s data -- and Schaeffer’s signature contrarian angle -- is the analyst sentiment. Heading into Friday’s trading, 10 of the 13 brokerage firms in coverage boast a "buy" or "strong buy" recommendation. Should this optimism begin to unwind, it could put added pressure on ABBV shares.
Optimism is surging in the options pits as well. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AbbVie stock sports a 50-day call/put volume ratio of 3.83, which stands higher than all other readings of the past 12 months. In other words, long calls are more popular than usual, leaving ample room for put traders to enter the ring.
Now might be a good opportunity for put traders to speculate on ABBV with options. The security sports a Schaeffer's Volatility Index (SVI) of 21% which sits in the relatively low volatility 23rd percentile of its annual range. In other words, options traders' volatility expectations aren't that high at the moment.
Subscribers to Chart of the Week received this commentary on Sunday, January 2.