Shares of biotech giant Amgen, Inc. (NASDAQ:AMGN), while higher by roughly 19% for the year, also remains a pain trade for momentum-chasing traders as well as longer-term investors. Yet, if one looks at the broader large-cap biotech picture and applies a multi-time-frame analysis then there is still little not to like in AMGN stock. The patient will ultimately be rewarded.
The broader large-cap biotech space as represented by the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) is also higher by around 18% for the year, which is to say that AMGN stock in terms of performance is trading just about in line with its peers, on average. All else being equal, this would thus also mean that AMGN stock stands a good chance of continuing to trade with this correlation to the IBB ETF.
The IBB ETF had a nice breakout move in mid-June, but by late July, as many large-cap biotechnology stocks began to report earnings, fell into a consolidation phase that thus far still has it holding above its 50-day simple moving average.
As a point of reference, when I last mused about AMGN stock on July 14, I offered that a near-term bullish trade was setting up toward the $180 target but that it would need to be exited before the earnings report on July 25 due to the binary reaction to the stock after earnings.
Very much according to my trading plan, AMGN stock did hit my $180 upside target on July 20, 21 and 24, and thus allowed me and my clubhouse members to exit the trade before the earnings report with nice profits.
AMGN Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, we see that AMGN stock following a major big-picture consolidation phase that lasted from the year 2000 to 2012, finally began to resolve higher.
This move lasted about three years and by summer 2015 it had finally exhausted itself. Since then, while the stock has been holding on to its red 200-week simple moving average, in this time frame it has largely treaded water.
This no doubt has frustrated longer-term investors that in AMGN stock over the past couple of years have essentially been sitting on dead money, yet in this time frame it is also difficult to make a bear case from a charting perspective.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that AMGN stock had a negative initial reaction to its July 25 earnings report, as the stock gapped lower and rejected the previous highs from March 2017. The post-earnings selling however has thus far only been a two-day event and the stock has since traded in a tight and uneventful range.
In other words, AMGN stock and by extension the broader large-cap biotech space over the past few weeks has been in consolidation mode, and new money from investors has not been allocated to this space.
The daily chart, however, does reveal some near-term support areas such as the blue box around the low $170s or high $160s.
In summary, AMGN stock currently finds itself in a post-earnings-consolidation phase and a one- or two-day wake-up rally is needed to get it tracking higher again. At the moment, I am defining such a wake-up rally to mean the stock has to recapture the $176 area, which then could start pushing it back higher toward the low $180s as a next near-term upside target.
Check out Anthony Mirhaydari’s Daily Market Outlook for Aug. 10.
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