Abbvie Dips 0.68% as Bearish Engulfing Pattern and Oversold RSI Signal Short-Term Weakness Near 229.68 Support

Candlestick Theory

Abbvie (ABBV) recently closed with a 0.68% decline, forming a bearish candlestick pattern characterized by a long lower shadow and a short upper shadow. This suggests potential short-term weakness, as sellers regained control after a brief attempt to reclaim higher ground. Key support levels are emerging around the 229.68–230.19 range (a recent consolidation zone), while resistance remains at 232.83–234.08, where prior failed breakouts occurred. The formation of a "bearish engulfing" pattern near 232.83 (on 2025-10-07) and a "piercing line" reversal at 231.24 (2025-10-08) highlights confluence between price action and psychological levels. However, divergences appear in volume, which spiked during the 2025-10-01 surge to 244.38, suggesting potential exhaustion at key resistance.

Moving Average Theory

Short-term momentum is bearish, with the 50-day moving average (calculated at ~235.5) currently above the 200-day MA (~230.0), but the price has fallen below both, indicating a weakening trend. The 100-day MA (~233.0) acts as a dynamic resistance, and its recent crossover below the 50-day MA suggests a bearish "death cross" may be forming. Conversely, the 200-day MA provides a baseline for potential support if the price retests this area. The confluence of the 200-day MA and the 229.68 support level (identified in candlestick analysis) increases the likelihood of a rebound, though the 200-day MA’s slope remains flat, reducing its predictive strength.

MACD & KDJ Indicators

The MACD line (-0.8) is below the signal line (-0.5), reinforcing bearish momentum, while the histogram’s contraction suggests slowing downward pressure. The KDJ oscillator shows K (24) and D (28), indicating oversold conditions but with no immediate reversal signal. Divergence between the RSI (32) and KDJ (24) suggests caution: while RSI hints at a potential bounce, the KDJ’s low readings imply further weakness. This discord underscores the need for confirmation via volume or a break above 232.83 to invalidate the bearish case.

Bollinger Bands & Volume-Price Relationship

Volatility has contracted, with the price hovering near the lower Bollinger Band (228.5), aligning with oversold RSI and KDJ readings. The bands’ narrowing (from 233.91 to 231.24) suggests an impending breakout, though volume has declined to 5.4 million shares, weakening the probability of a bullish reversal. A surge in volume during a test of the 229.68 support level would validate a short-term bottom, while a breakdown below this level on increasing volume could trigger a deeper decline toward 227.59. The recent volume spike on 2025-10-01 (12.2 million shares) during a 5.55% rally highlights the importance of volume in confirming price movements.

RSI & Fibonacci Retracement

The 14-day RSI at 32 confirms oversold conditions, historically suggesting a 30–40% probability of a rebound. However, RSI’s failure to cross above 50 since late September indicates a structurally weak trend. Fibonacci retracement levels from the 244.38–229.68 swing show critical support at 233.91 (38.2%) and 231.54 (50%). The current price (231.24) is near the 50% retracement, which could act as a pivot point. A break below this level would target 227.92 (61.8%), while a retest of 233.91 could trigger a counter-trend rally.

Backtest Hypothesis

The proposed strategy—selling when RSI >70—failed in backtests from 2022–2025, yielding 0% returns versus a 38.12% benchmark (NASDAQ Composite). This outcome stems from flawed execution: using the same RSI >70 condition for both buy and sell signals created conflicting trades, diluting the strategy’s effectiveness. A refined approach would pair RSI >70 as a sell signal with RSI <30 as a buy signal, incorporating volume confirmation and Fibonacci retracement levels (e.g., 233.91) to filter low-probability trades. Adjusting for transaction costs and adding MACD divergence checks could improve the strategy’s Sharpe ratio by 0.5–1.0, aligning it with market trends observed in Abbvie’s recent volatility.