Wednesday, February 23, 2011

AMGN Watch

'Tis the season of the bears, among them, the biotech company Amgen Inc. (AMGN), which fallen past the lower 55-day price-channel line last Friday and hasn't looked back.

It would help my comfort level if its financial were a bit more bleak.

AMGN has been in bear phase on the more volatile indicators since late January.

phase pfeppstrend

AMGN has a return on equity of 19.9% and a debt/equity ratio of 0.56x. I'd be happier with the return under 15% and a debt/equity ratio greater than 1x. The company has shown earnings growth for seven years out of the past 10, and nine out of 10 for sales. But then, no potential trade is perfect.

The most attractive feature of the price channel chart -- the unrelenting price decline aside -- is the average directional index, which stands at 34 and has a steep upward slope. This shows that the downward trend is strong, the breakout through the price channel suggests that it has legs.

symbdayblevelstopadx ≥40?2-day?
AMGN feb18 $52.36 $53.51    

It also has room to fall. Today's low -- now at $51.37 -- will be a swing low. The next resistance was set on Aug. 27 last year, and before that, April 2009.

Reversal Levels
  • $58.19, +13.3% (jan. swing high)
  • $55.64, +8.3% (50-day moving average)
  • $54.71, +6.5% (200-day moving average)
  • $54.31, +5.7% (20-day moving average)
  • $51.37 --- You are here.
  • $50.26, --2.2% (aug. 2010 swing low)
  • $44.96, -12.5% (april 2009 swing low)

Longer term, AMGN has been tracing out a symmetrical wedge from the autumn of 2008. This pattern is agnostic as to direction, but a break below the lower trend line, as appears to be happening now, would be quite bearish.

The monthly-chart indicators are in neutral phase, but with a bearish cast.

Monthly chart
phase pfeppstrend

Bottom line: Despite the strength of the fundamentals, I like AMGN has a bear play, based on the chart. It's the sort of play that, for my accounts, I would hedge as a vertical spread rather than going for unhedged puts or short shares.

Table Abbreviations:
  • pfe - Location of the polarized fractal efficiency line.
  • pps - Person's Proprietary Signal mode.
  • trend - Trend of the polarized fractal efficiency line.

Key to the PPS/PFE tables
phase bull phase
bear phase
pfe +100 and above
+50 to below 100
0 to below +50
below 0 to above -50
-50 to above -100
below -100
pps bull confirmation
bear confirmation
trend uptrend
no trend

More on the PFE/PPS analysis

Read a detailed explanation of the analytical tools and how they’re used, including trading rules.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

No comments:

Post a Comment