PreMarket Prep Stock Of The Day: Abbott Labs

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

Traders, investors and especially algorithms are keying on pharma or biotech stocks that may play a role in developing testing kits, vaccines or even a cure for the coronavirus. 

One issue that attracted a buying frenzy in after-hours trading on Friday and in premarket trading Monday was Abbott Labs ABT.

FDA Authorizes Fast-Acting Test To Detect COVID-19

On Friday evening well after the close, Abbott announced that the FDA issued an Emergency Use Authorization for the fastest available molecular point-of-care test for the detection of COVID-19. An added bonus: the test delivers positive results in as little as 5 minutes and negative results in 13 minutes.

Traders, Algorithms Nibble On The News, Then Gorge

With limited liquidity in the closing hour or so of the after-hours session, the issue moved from the $74 area to as high as $77 before ending the session at $76.35.

As the news circulated on the wires over the weekend, the issue opened sharply higher at 4 a.m. Monday at $84.95 and continued in that direction on heavy volume. It did not peak until it came within striking distance of its all-time-high ($92.45), reaching $91.50. At that point, the big sellers came in and began to take profits.

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How Much Will Abbott's Test Have An Impact On Earnings?

It is hard to deny that the test will be a positive for the company and will have a positive impact on its futures earnings. PreMarket Prep co-host Dennis Dick questioned the degree of that impact. 

While the issue was being discussed on the show Monday, it was trading in the $87 area. Dick said that adding $30 billion in market cap to a $131-billion company overnight was overdone.

He said he was hoping to short the issue in the $90 area, but was never afforded the opportunity.

The stock was trading 7.32% higher at $80.02 at the time of publication. 

Abbott Moving Forward

Investors that are long the issue should pay close attention to Monday's price action, including the high, low and close. It is imperative that the issue continues to make new daily high and closes to push itself back toward its all-time-high.

If today’s low of $78.47 is breached, there may be limited support in the issue until Friday’s closing price of $74.56.

Photo courtesy of Abbott.