Shares of large-cap biotechnology stocks as a group and as represented by the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) rallied along with the broader stock market on Wednesday. While so doing, some of the larger biotech names in the space, such as Amgen, Inc. (NASDAQ:AMGN), broke past key near-term technical resistance. This now sets up bullish trades for AMGN stock.
Each time I discuss a biotechnology stock in this column I must also point out that these stocks, even the large ones, can be volatile and prone to sharp price movements in either direction. Part of this random movement can come from individual drug approvals/disapprovals from the FDA process among other things. As a result, when “playing” biotechnology stocks I largely prefer to trade them as a theme using the aforementioned IBB ETF. This can significantly dampen any unexpected bearish news on any given bullish trading position, all else being equal.
One of the largest biotechnology names is Amgen, and it is also one that has a fairly good track record of moving in tandem with price movement of the IBB ETF as a result.
AMGN Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the above multiyear weekly chart of the IBB ETF, note that although still notably off its 2015 all time highs, it continues to hold its red 200-week simple moving average as support. The latest bounce off this moving average occurred in late April and this was the origin of the breakout move we will see on the daily chart.
It is also important to note that the broader healthcare stocks sector of the S&P 500 has acted better as well in recent days.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart of AMGN stock, we see that Wednesday’s 1.58% rally pushed it past simple diagonal resistance (black line) as well as back above its medium-term moving averages and marginally out of a choppy multiday range. Look a little closer and we see that on Tuesday the stock closed well off its intraday lows, which is to say that the bears didn’t have much staying power. This was then followed by Wednesday’s “continuation buying,” which further confirmed the lack of selling power by the bears on Tuesday.
From here, active investors and traders could look to buy AMGN stock for a next upside target around $185, followed by $188. Any strong bearish reversal on a daily closing basis is a stop-loss signal.
Alternatively, one could buy a July $180-$185 bull call spread.
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