Shares of biotechnology giant Amgen, Inc. (NASDAQ:AMGN) are higher by just about 27% for the year-to-date but in the bigger picture really just started on a major new breakout rally. Patience and focus on the appropriate time frame is crucial for AMGN stock traders and investors at this juncture.
Healthcare stocks as a sector and biotechnology stocks as a group and as represented by the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) have done well overall so far in 2017 and promise more upside. In the near-term, these stocks are in consolidation mode and most likely will not be immune to any potential seasonal stock market volatility in September and October
AMGN Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Getting right to the charts and looking at the multiyear weekly chart, we see that AMGN stock in late 2014 began topping out and slipped into a multiyear sideways consolidation phase. This consolidation to no great surprise (considering that stocks are a highly correlated asset class, particularly within any given sector or stock) coincided with a corrective phase in the IBB ETF.
After chopping back and forth in a wide trading range for multiple years, however, AMGN stock in August and so far in September has broken out of this range to the upside.
While not crucial in and of itself, through the lens of technical analysis 101 it was also nice to see that AMGN stock in November 2016 at the lower end of its sideways trading range found strong support at its red 200-week up-trending moving average.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that in the first half of September, AMGN stock also scored a nice, clean breakout past its previous 2017 horizontal resistance area around the $182 mark.
After clearing this resistance area, the stock over the past couple of weeks has settled into a classic — and so far, bullish — consolidation pattern that we can label as a “bull flag” pattern. Note how this consolidation pattern so far is taking place above the previous horizontal resistance area.
For me, in order to buy AMGN stock again at this juncture I need it to break out of the bull flag pattern and clear above the $189-$200 area on a daily closing basis, and with some conviction. If and when this takes place, a next upside target becomes the round $200 number.
Note that there are still a few weeks left until large-cap biotechnology companies such as Amgen report their next batch of earnings. The way I see it, AMGN stock either makes an attempt at a next leg higher between now or earnings, or potentially following the earnings report. From a swing trading perspective I would not hold this stock through the earnings report.
Check out Anthony Mirhaydari’s Daily Market Outlook for Sept. 27.
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