(NASDAQ:AMGN) broke out to an all-time high today, which is quite a feat for a $70 billion market cap biotechnology company that has had numerous strong rallies over the past 20 years. Amgen is one of the few stocks in this market that I view as a good long-term hold. It is a stock that has an attractive valuation and secular tailwinds at its back. It has a 2% dividend yield, is projected to grow earnings 12%, and is priced at a trailing p/e of 15x, which is quite cheap in the context of its earnings growth rate. And you get all that for a stock that has not had an annual earnings decrease in the past 10 years. In other words, about as safe as you can get.
The long-term chart shows the importance of the $80 area. Here is the 20-year monthly chart:
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The $80 level acted as resistance during the last two bull markets in AMGN, and the stock finally broke 80 convincingly last year. In the past six months, the stock has traded between 80 and 90, and finally broke above the 90 level today on increasing volume. Here is the one-year chart:
Click to enlarge
Now that the stock has broken above 90, what’s the trade?
I prefer to see how a stock acts on a long-term breakout like this one. If the stock continues to run higher, that adds confirmation to the breakout. At that point, I would hope for a pullback to near the $90 level for a long entry. For now, it’s a wait-and-see situation, with the thought that a fat pitch might develop in the future.
Of course, that’s a trader’s mindset. For a long-term investor, this is probably a decent stock to put away in the drawer and forget about. AMGN is one of the few stocks in this market where that description fits.
This item by Enis Taner was originally published on RiskReversal.com
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