AMGN Stock: The Completed Technical Price Pattern Points Towards Higher Stock Prices
This time last year, the biotechnology stocks were out of favor and lagging behind the market indices. A lot has changed since then because this sector is currently red hot and leading the market. So it should not come as a surprise that I am focusing on a biotechnology stock in Amgen, Inc. (NASDAQ:AMGN) stock, and the reason is quite simple too; I have the inclination to believe that higher AMGN stock prices are now on the horizon.
If you have not come across my publications in the past, it is worthwhile to note that my views are generated using technical analysis. This method of investment analysis is based on using historical price and volume data points to discern and forecast trends.
This publication is a follow-up to a previous report titled “Amgen Stock Is Setting Up to Make a Bullish Advance,” which was published on August 8, 2017. In that report, I highlighted a number of indications that were supporting the notion that higher stock prices were on the horizon, but there was one missing piece in an uncompleted technical price pattern that was necessary to confirm that a price advance was underway.
The completed technical price pattern is illustrated on the following Amgen stock chart.
Chart courtesy of StockCharts.com
On September 11, Amgen stock completed a technical price pattern known as a cup and handle pattern by breaking above a key level of price resistance. This level of price resistance, which stood at $182.50, defines this pattern.
This level of price resistance was first established in March, and after it was attained, a large sell-off ensured. In July, that same level was met once again, and once again, a sell-off ensued, but the magnitude of this move was muted compared to the previous time this level was met. These reactions off this level of resistance at $182.50 are what created the tea cup-shaped pattern that is known as cup and a handle pattern.
Also Read: Top 10 Biotech Companies to Watch in 2017
The completed cup and handle pattern suggests that higher prices are now on the horizon. It also established the previous level of price resistance that thwarted previous attempts to move beyond it, as a new level of price support.
Aside from suggesting that higher prices are on the horizon, this pattern can be used to establish a preliminary price objective. This objective is obtained by taking the depth of the pattern and extrapolating that value above the level of resistance that defined the pattern. This method produces a preliminary price objective of $212.50, which is 14.95% from current prices.
The bullish price objective established by the completed cup and handle pattern is being reinforced by a very influential momentum indicator.
This momentum indicator is illustrated on the following Amgen stock chart.
Chart courtesy of StockCharts.com
This AMGN stock chart focuses on the indicator located on the lower panel labeled “MACD.” MACD is an acronym for moving average convergence/divergence and this indicator is used to distinguish between bullish and bearish momentum using the crossing of a signal line.
Momentum is the driving force that influences that trading action in a stock’s price, and it is important to trade in the direction suggested by the indicator because it creates a path of least resistance geared in that direction.
For instance, in November 2011, a bullish MACD cross was generated, which indicated that bullish momentum was influencing that trading action in AMGN stock. While this indication was in bullish alignment AMGN stock price appreciated to the tune of 122.08%.
In August 2015, a bearish MACD cross was generated, which indicated that bearish momentum was influencing the trading action in Amgen stock. While this indication was in bearish alignment, the stock failed to stage an advance and the share price traded in a range that was bound by $182.50 and $130.00.
In June of this year, a bullish MACD cross was generated, which now suggested that bullish momentum is influencing the AMGN stock price. This indicator has created a bullish backdrop and it is why I have been watching Amgen stock awaiting a bullish resolution to the cup and handle pattern that was just completed.
Amgen stock has completed a technical price pattern that is now suggesting that higher prices are on the horizon. This bullish view is being reinforced by a very influential momentum indicator. As a result, I am bullish on AMGN stock going forward with the contingency that indications that generated this view remain in bullish alignment.