Large-capitalization biotechnology stocks as represented by the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) lifted on Thursday on the back of comments from the Independent Payment Advisory Board said that the Medicare Trust Fund will be solvent until 2029, which should translate into no cost cuts. Shares of Amgen, Inc. (NASDAQ:AMGN) rallied 1% on the day and while no major feat in percentage terms, on the charts AMGN looks constructively positioned through both the near and longer term.
As a reminder, certain parts of the stock market are best treated as “themes” as opposed to single-stock stories. Biotechs for example, particularly the smaller-capitalization names, are notoriously volatile stocks. As such as it relates to biotechnology I prefer to stick to the large cap names and usually prefer to play this group of stocks using the IBB ETF. AMGN stock however is one of the very largest single-stock biotech names, and while this by no means makes it bulletproof, the current setup offers well defined risk/reward for traders.
Also note that many large-cap biotech names such as Amgen report earnings the week of July 24, which is to say that from a trading perspective, it is likely best to step aside through these earnings reports, as better setups tend to occur once the earnings reports are out of the way.
When I last mused about biotechnology stocks in this column and particularly on the IBB on June 2 I offered that my proprietary indicator had flashed a so called “B2 buy signal” with a first upside price target near $300. This upside price target ended up being reached and then some, about two weeks later.
AMGN Stock Charts
Looking at the multiyear weekly chart of AMGN stock we note that despite the recent rally, the stock largely remains in a multiyear sideways consolidation phase (blue box on chart). The recent rally is merely pushing the stock back to the upper end of this range thus far.
At the bottom of the chart, I plotted the IBB ETF, where we see that the rally over the past six weeks or so has pushed it out of a 15-month consolidation phase to the upside.
Traders will note that on the daily chart, AMGN stock has spent the better part of the past three weeks consolidating in a tight sideways range. This range is roughly supported on the downside by the yellow 21-day moving average and on the upside has a next target at the top of the down-gap from March (top of blue box), around the $180 mark.
Traders and active investors could now look to a near-term trade toward $180 but respecting the earnings report scheduled for July 25. Ultimately, a break and hold above the $180 area could ring in the beginning of a more meaningful leg higher, with a $200-$210 next upside target.
Check out Anthony Mirhaydari’s Daily Market Outlook for July 14.
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