How to Play Amgen

 | Apr 27, 2014 | 6:00 PM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

amgn

When should we really begin worrying about the recent decline in Amgen (AMGN)? Moreover, where might we see a decent buy entry? To answer these questions, let's start by looking at the weekly chart.

Amgen (AMGN) -- Weekly
Source: Dynamic Trader

When we focus on this bigger-picture chart, we see that the current decline -- from the March 2014 high -- is still only similar to a few of the prior larger declines we've seen since 2008. So far this decline has brought the stock down by $17.66, and the three prior swings, marked on the chart, respectively came to $19.92, $21.55 and $20.80.

My thinking is that, as long as the stock doesn't decline much more it did during those prior pullbacks, we should watch the support zone illustrated on this chart -- $107.41 to $109.04. As long as the price holds above this key area, we can start looking at buy triggers, for example, on a 30-minute chart. Now, if you look at the daily chart, you can see that the price activity is not yet indicating any type of reversal -- but we are still going to stalk this one!

Amgen (AMGN) -- Daily
Source: Dynamic Trader

Let's look at the daily chart next. Here, I can also see some possible support areas that overlap the zone on the weekly chart: $110.65 to $110.85 and then $106.25 to $109.31. Besides this, I have run some Fibonacci timing cycles, and these are telling me that the first week of May carries higher odds of producing a tradable low in Amgen.

Now, I want to emphasize to you that this is a counter-trend trade setup. If you are not comfortable with these, it would be better to stay away until the chart starts to look more constructive. But, assuming you are on board, you shouldn't enter the buy side unless you at least see some reversal indications on something like a 30-minute chart -- triggers that would suggest it's worth placing a bet against one of the support zones.

So let's watch Amgen next week to see if it can hold above the listed zones and fire off a buy trigger. If it does, note that I like to define my risk either below the low end of the support zone or under the low that the stock hit prior to the buy trigger firing off.

Finally, as for when I'd become concerned about this stock: If Amgen doesn't hold above that zone -- if the stock starts declining far more than $22 -- that's when I'll consider that we could see a much deeper downside correction.  

Please refer here for more information on trade triggers.

See here for general guidance on Fibonacci trade setups.

Columnist Conversations

The Fibocall: Twitter updated from October 28 "All is not lost, though, as the stock is about to enter the bou...
The Fibocall: Amazon updated from October 24 (DAY 1) "Readers of The Fibocall know that we like to examine sto...
Gilead Sciences (GILD) bouncing back strongly after a bit of a sell-off yesterday after earnings report after ...
Carley, I could not disagree more on the value of the CFTC data. The numbers cannot be pooled on a cross-sect...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.