Amgen Inc (AMGN), the biotech sector’s highest-capitalized stock at $114-billion, may be close to completing a 2-year rectangular correction and heading into a strong trend advance that hits bull market and all-time highs. The breakout would offer welcome relief to shareholders holding their collective breathes while the stock bobs and weaves through a 50-pt trading range that’s triggered many sleepless nights since topping out in December 2014.
The broad biotech sector may be at the verge of a new uptrend as well, with observant market players now focusing their attention on iShares Biotechnology Index ETF (IBB). The fund just posted a higher low within its yearlong basing pattern, setting the stage for a test of range resistance centered at $300. A base breakout should ignite strong buying pressure across all capitalization levels, drawing speculators into a market niche that thrives on short-term capital infusion.
AMGN Long-Term Chart (1993-2017)
A long uptrend topped out at $9.50 (post three stock splits) in 1992, giving way to a rounded correction that persisted into a 1995 breakout and trend resumption. The stock rallied in multiple waves into the 2000 high at $80.44 and sold off during the Dot.com bear market, losing more than 60% of its value. It bottomed out at $30.57 in July 2002 while a bounce into 2003 came up short, yielding more than two years of sideways action, ahead of a breakout that posted a nominal new high at $86.92 in September 2005.
That rally wave posted the highest high for the next seven years, ahead of a downtrend that hit bottom in the upper-30s in March 2008, well ahead of the economic collapse. A quick bounce to the mid-60s got sold, giving way to a multi-year symmetrical triangle that finally broke to the upside in 2012. The stock reached the 2005 high later that year, triggering a breakout and uptrend that continued into the December 2014 high at $173.14.
It then settled into a sideways pattern that carved three failed breakout attempts, ahead of an August 2015 breakdown that continued into the September low at $130.09. That nadir marked the lowest low of the correction, ahead of additional failed attempts in August and September, with those disappointments contributing to a steep decline that tested long-term range support in November 2016.
AMGN Short-Term Chart (2014–2017)
The August 2015 rally attempt exceeded the prior high by more than eight points, drawing in a healthy supply of bagholders who were then pummeled in a two-wave selloff that relinquished 51-points in just eight weeks. The stock has traded within those boundaries for the last 15-months, with this week’s price action triggering a gap through the 50% retracement in a bullish island reversal that’s mounted the 200-day EMA for the first time since October.
On Balance Volume (OBV) has posted an unusually strong and long-term bullish divergence, entering an accumulation phase in 2014 that’s printed just minor setbacks in the last two-and-a-half years. It hit an all-time high in July 2016, during the last breakout attempt, and gave up less than half of the 2016 range during the decline into November. The bullish trajectory now appears to favor a fresh assault on the indicator’s high in coming weeks.
The Bottom Line
Amgen may have entered a positive feedback loop that feeds on daily gains until it reaches another test at long-term range resistance above 180. Bulls have the advantage after six failed breakout attempts, with the highly positive volume pattern generating a strong tailwind while the broad biotech sector wakes up after a long slumber. Taken together, these elements could combine to trigger a powerful breakout that lifts the stock toward $250.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>