How To Trade This Biotech Stock That Looks To Be Breaking Down
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Amgen, Inc. is a biotechnology company, which engages in the discovery, development, manufacture and marketing of human therapeutics. Its products include the following brands: Aranesp, Aimovig, KANJINTI, EVENITY, AMGEVITA, AVSOLA, BLINCYTO, MVASI, Corlanor, Enbrel, EPOGEN, IMLYGIC, Kyprolis, Neulasta, NEUPOGEN, Nplate, Parsabiv, Prolia, Repatha, Sensipar, Vectibix, Otezla, RIABNI, and XGEVA.
Take a look at the 6-month chart of Amgen (AMGN) below with the added notations:
Chart of AMGN provided by TradingView
AMGN had formed key support at $280, while also declining against a down trending resistance line. Those two lines have the stock trading within a common formation known as a descending triangle, or a pennant (yellow). Eventually, AMGN had to break out of the pattern, and Friday the stock broke support.
The Tale of the Tape: AMGN broke down out of the bottom of its triangle. A short trade could be made near current levels, or on rallies back up to previous support, with a stop set above the level of entry.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key…
Good luck!
Christian Tharp, CMT
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