Biotech stocks as a group have seen a big resurgence since late June as the broad rally off the February lows continues to see sector and group rotation and investors pile into risk assets. The iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB), for example, has risen more than 20% over the past month-and-a-half. And within this ETF, stocks such as Amgen, Inc. (NASDAQ:AMGN) continue to look promising for another leg higher.
Amgen stock currently is the largest holding in the IBB, making up more than 8% of the ETF. When AMGN reported its latest quaterly earnings on July 27, the company showed a promising rise in profits and even raised its 2016 outlook. Amgen now expects revs between $22.5 billion to $22.8 billion, which is higher than previous guidance of $22.2 billion to $22.6 billion.
All of this excited investors, and Amgen stock managed to push higher after earnings despite its strong rally prior to the report.
All else being equal, this is the sign of a strong stock — one that active investors and traders should respect on the long side until the picture changes.
Amgen Stock Charts
On the multiyear weekly chart, Amgen stock — after an orderly ascent off its 2011 lows — by late 2014 began separating itself further from the red dotted line. Ultimately, AMGN topped, and while a minor overshooting rally took place in July 2015, Amgen has been in a wide consolidation range ever since.
From a trend following perspective, we see that on a weekly closing basis, AMGN stock in 2015 and 2016 dipped below trendline support several times, but if one were to look at this using monthly bars, the trend largely remained intact. In other words, the blue box on the chart apparently has been a healthy sideways consolidation phase rather than a topping process, at least for the time being.
Furthermore, the rally over the past month and a half is now attempting to break the stock out of this consolidation range.
Moving over to the daily chart, we see that while Amgen’s rally has been notably steep for the past few weeks, it has held its yellow 21-day simple moving average as support. Over the past two weeks, the stock consolidated in a sideways manner and formed what technical analysts would refer to as a bull flag pattern.
On Monday, AMGN rose about 1.5%, and by so doing also broke out of this bullish flag pattern, which all else being equal now favors a push higher toward $185 as a next upside target in the near-term.
Any meaningful bearish reversal on a daily and particularly on a weekly basis would be a signal to get out of the trade.
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