At the top of Jim Cramer's "Mad Money" program on CNBC last Friday, Jim offered a cautious game plan for this week's action. The week begins with an analyst meeting with Amgen Inc. (AMGN) . Cramer said this biotech giant needs to turn things around. The charts of Amgen, which is a holding of Cramer's Action Alerts PLUS charitable trust, reflect that dour opinion; let's check them out.
In this daily bar chart of AMGN, below, we can see that prices peaked back in September. A downtrend has been in place since, with new lows made this past month. A series of lower lows and lower highs are the simple definition of a downtrend.
We also can use math to tell us the trend, and AMGN is trading below both the declining 50-day moving average line and the slower-to-react 200-day line. The volume pattern is hard to interpret, but the daily On-Balance-Volume (OBV) line has been in a downtrend from December.
In the lower panel of this first chart is the 12-day price momentum study or indicator. This leading indicator shows a higher low from April to May while prices make a lower low. This difference is what technical analysts call a bullish divergence -- price is doing one thing and the indicator is doing something else. A bullish divergence can foreshadow a bounce or rally. This is not a big divergence, but it is a start.
In this weekly bar chart of AMGN, below, we can see the price action of the past three years. Prices were in an uptrend from late 2016 to late 2018, but a downtrend is now in place with prices below the declining 40-week moving average line. The weekly OBV line is pointed down, which tells us that sellers of AMGN have been more aggressive this year. The weekly Moving Average Convergence Divergence (MACD) oscillator is below the zero line in a sell configuration.
In this Point and Figure chart of AMGN, below, we can see a large distribution (sell) pattern with a potential downside price target or objective of $152.
Bottom line strategy: AMGN is in a downtrend and probably pointed lower. In the short run this stock could bounce as momentum has slowed, but the bigger picture is for further weakness to the $152 area.
