Shares of Amgen, Inc. (NASDAQ:AMGN) rose close to 2% last Friday as healthcare stocks as a group saw a much-needed rally. While one day does not make a trend, the continued sector and group rotation in stocks over the past few months does leave open some hope that this rotation will ultimately move into healthcare and biotechnology names like Amgen stock into year-end.
A quick glance at the scoreboard reveals that among 2016’s best sectors are materials and financial stocks, while healthcare and utilities stocks are lagging. In fact, the healthcare sector remains lower by 5% for the year, while biotechnology stocks — as represented by the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) — are lower by about 20%.
Of course, this comes after biotech stocks outperformed big-time for five years straight. Thus, a breather this year shouldn’t be too surprising.
When considering whether biotech stocks could be on Santa’s buy list in the next three weeks into year-end, the bears argue that underperforming stocks won’t get snapped up from fund managers. Instead, the focus is on chasing outperforming sectors higher due to window-dressing games.
The bulls, on the other hand, argue that sector and group rotation and increasingly overbought conditions could see money rotate into the underperforming biotech group — which would bode well for AMGN stock.
Amgen Stock Charts
On the multiyear weekly chart, we see that AMGN has largely been stuck in a well-defined but wide trading range since late 2014. So, while the stock remains lower by about 11.6% for the year-to-date, it is now just testing the lower end of a multiyear trading range.
On the chart, note that since October 2014, Amgen stock has bounced off horizontal support around the low to mid-$130s three times.
This time around, the stock’s red simple 200-week moving average is also coming into support at this area, which must be respected as support until broken.
On the daily chart, we see that after a flush lower in late October and early November, AMGN stock saw a notable pop following Donald Trump’s presidential election victory.
Despite the lackluster price action over the past few weeks, however, the lower end of the breakaway gap from Nov. 9 continues to hold as support. Last Thursday, Amgen stock showed initial signs of exhaustion selling as the stock closed off the day’s lows, which was followed the next day by follow-through buying.
Yes, AMGN remains stuck in a multiweek trading range and still below both its 8- and 21-day simple moving averages (blue and yellow lines, respectively). But a daily close above the $145.50-$146 area could give this pick some better legs again.
I would see Amgen stock moving into the low to mid-$150s as a next upside target.
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