Abbot Laboratories Cracks the Code

Yesterday, we looked at a Monthly Price Chart of ABIOMED, Inc. noting that the stock’s 1-Month Price is trading above the 10-Month SMA.

Today’s Chart of the Day is a Moving Average Convergence/Divergence (MACD) chart for Abbott Laboratories (NYSE: ABT).

Abbott Laboratories discovers, develops, manufactures, and sells healthcare products worldwide. Its Established Pharmaceutical Products segment offers generic pharmaceuticals for the treatment of pancreatic exocrine insufficiency; irritable bowel syndrome or biliary spasm; intrahepatic cholestasis or depressive symptom; gynecological disorder; hormone replacement therapy; dyslipidemia; hypertension; hypothyroidism; Meniere’s disease and vestibular vertigo; pain, fever, and inflammation.

Now, below is a Daily Price chart with a 12/26/9 MACD indicator for Abbott Laboratories, the MACD chart is shown below the Daily Price Chart.

The ABT Daily Price chart below shows that ABT stock is in a price uptrend as the 12/26 Day MACD line (black line) is above the 9-Day EMA (purple line).

MACD lines were created to help traders verify the momentum of any given stock’s price. MACD lines are plotted by subtracting the longer-term Exponential Moving Average from the shorter-term Exponential Moving Average. In this example we are using the most common parameters, the 26-Day Exponential Moving Average and the 12-Day Exponential Moving Average.

chart

When the 26/12 Day MACD line crosses the 9-Day EMA line, this signals either a “buy” or a “sell.” When the 26/12 MACD crosses above the 9-Day EMA, this is a ‘buy’ signal and when the 26/12 MACD crosses below the 9-Day EMA, this is a ‘sell’ signal.

MACD charts also include a histogram bar graph. This portion of the chart helps to indicate when a stock’s momentum is either accelerating or slowing. When a crossover initially occurs, the histogram’s bar will be near flat as the two indicator lines have converged. As the 26/12 MACD and 9-Day EMA lines begin to separate, the bars grow in height, indicating a widening gap and acceleration for the stock’s momentum. When the histogram’s bars begin to shrink this indicates a narrowing of the gap between the 12/26 Day MACD and the 9-Day EMA and a slowing of the stock’s momentum.

When the histogram bars begin to shrink, this can be a signal that a crossover of the indicator lines could happen soon.

As you can see in the chart above, once the MACD line crossed above the 9-Day EMA, ABT’s share price began to rise.

If you had purchased ABT shares when the MACD ‘buy’ signal occurred for the stock back on June 30, when the it was around $91.43, you’d be up 11.05% by now.

Not a bad profit for a month-long hold of a major pharmaceutical company.

We will continue to monitor ABT as long as the stock’s momentum continues its bullish run.

Additionally, we’d like to talk about how a previous Chart of the Day stock has done…

The Power of Options

On July 21, we highlighted Overstock.com Inc. (NASDAQ: OSTK), noting that OSTK’s OBV line is sloping up validating the stock’s bullish trend.

If you happened to have purchased OSTK shares on that day, you’d already be up 45.4%.

But… if you had purchased the right option contract, you would be up 194.0% in just under two weeks’ time!

That’s the power of options.

Best Regards,

Chuck Hughes
Editor, Chart Of The Day

Chuck Hughes

Written By Chuck Hughes

Before Chuck Hughes won 10 Trading Championships, he was an accomplished Air Force pilot. In fact, he credits his success as a stock and options trader to his disciplined upbringing and career. When he was deciding between a career in the Navy and a career in the Air Force, the Navy told him he’d only have a 33% chance of flying jets. The Air Force gave him 100%. He liked those odds better. 35 years ago, Chuck had a wife, a young daughter, a son on the way, and a huge mortgage to afford. He didn’t want to give up on his lifelong dream and stop flying for a major commercial airline. He knew he needed to supplement his income during the 15 days a month he wasn’t flying. So he used his experience in discipline and math, and his understanding of finance and the stock markets (which he’d always been interested in,) and opened a $4,600 trading account. He made over $460,000 in profits his first two years of trading, and he hasn’t looked back since. When he was diagnosed with Meniere’s disease 15 years later, which commonly leads to vertigo…He knew his career as a pilot wouldn’t last much longer with those odds. But he didn’t have to scurry to find another gig, or panic about how his family would eat… He’d spent the last 15 years perfecting his system and raking in cash. As an options trader, Chuck does not let his emotions get in the way of his trading strategy. He adheres to disciplined and methodical options and stock trades. Because he respects the options game so highly, and understands the true freedom that financial solvency can bring, Chuck was able to design and refine his system and win those 10 Trading Championships. Put simply, Chuck Hughes’ trading strategies work, and in all types of market conditions. They’ve worked throughout the bull, bear, and flat markets America has seen in the last 30 years. Chuck Hughes has spent that time building a reputation as one of the most trustworthy options traders in the industry. His publishing group Legacy Publishing LLC was one of the few trading groups on the planet to have correctly predicted and profited from the 2008 financial crash .As a published author 16 times over, a 10-time Trading Championship winner, and an options-trading teacher for 25 years, he’s learned to trade and teach without an ego.