The bull market beat is trying to continue rolling on today, despite heavy headlines, with the Nasdaq Composite looking to stretch higher for the eighth day in a row. But with overbought pressures climbing, low-risk entries are disappearing faster than White House advisers.
Traders should resist the urge to chase stocks into the stratosphere and instead focus on those that offer better setups. Like Amgen, Inc. (NASDAQ:AMGN). Amgen stock has consolidated for the past few weeks and AMGN is just now flashing a breakout play.
A big picture view of Amgen reveals a steady, upward tilting channel complete with rising 20- and 50-week moving averages. Although the ascent hasn’t been as explosive as some, it sure is consistent.
At its current perch, Amgen stock sits midstream with plenty of room to rise to the upper trendline. This provides ample profit opportunity should healthcare stocks receive some love via sector rotation.
The daily chart reveals the recovery from February’s crash in greater detail. I find the groundswell in volume accompanying the most recent stage of the rebound particularly bullish.
When accumulation accompanies rallies, they have staying power. The past few weeks of chop are forming a mini-ascending triangle. Resistance near $191 is holding firm, but buying aggression continues to build beneath the surface. So says the higher-pivot lows.
All that remains now is a break above $191 resistance. A successful breach should tee the stock up for a run to $200.
An Amgen Stock Options Trade
The stock’s lofty price tag is translating into expensive option premiums. And that suggests a spread is the way to go for those not wanting to take a big risk. Buy the May $190/$200 bull call spread for $4.25.
The risk is limited to the $4.25, and the reward is $5.75. Amgen stock needs to rise above $200 by expiration to capture the max profit.
In timing the entry, you can either enter the trade now in anticipation of the breakout or wait for the price to pop above $191, then buy.
As of this writing, Tyler Craig didn’t hold positions on any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.