Zeroing In
The elves made bullish noise this week
over biotech. So how have these stocks shaped up in the wake of the table pounding?
Here’s my rundown, from the viewpoint of an intermediate-term trader.Â
My favorites are Amgen
(
AMGN |
Quote |
Chart |
News |
PowerRating),
MedImmune
(
MEDI |
Quote |
Chart |
News |
PowerRating) and Immunex
(
IMNX |
Quote |
Chart |
News |
PowerRating).
Amgen, the biggest of the biotechs by
sales and market cap, has formed the better part of the right side of a
correction-recovery pattern. It has overcome its mid level, which is the point
where a corrected stock has made up half of the point loss between pre-decline
high and subsequent bottom. The stock also has traded above, and found support
at, its 50-day moving average.
All charts in today’s column use a
logarithmic price scale.
Both facts indicate that the stock has
probably overcome the problem of overhead supply, the amount of stock in the
hands of investors who are eager to sell after suffering paper losses in their
shares.
What Amgen lacks is sharp
accumulation. The stock’s right-side gains came on inferior volume vs. the
activity during Amgen’s left-side decline. I’d like to see more accumulation
days.Â
You could regard the last nine
sessions as forming a handle in a cup-with-handle pattern, but the price
structure is too volatile for my tastes.
MedIumme
(
MEDI |
Quote |
Chart |
News |
PowerRating) has rallied
smartly in recent weeks. The stock now needs time to settle down and drift
lower. I want MedImmune to digest its gains and show us some support levels. At the same
time, I’d like to see the volume and volatility contract. That would indicate
that selling is diminishing and shareholders are prepared to hold at the current
market price.
Immunex
(
IMNX |
Quote |
Chart |
News |
PowerRating) has a ways to go
before it clears its mid level, which lies just under 60 a share. But the recent
action shows that institutions are piling back into the stock. On Friday, shares rose 7 1/4
to 44 11/16, clearing their 50-day moving average on twice their usual trade.
The stock closed right at its major
downtrend line. I wouldn’t buy straight into this uptrend. As with MedImmune,
you need to see this stock digest its gains and define a support level,
preferably on low volume. The tighter the trading range, the better. Then you go
long if the stock breaks higher on active trade.
Genentech
(
DNA |
Quote |
Chart |
News |
PowerRating) said its experimental treatment for heart
attacks failed to meet the objectives of a mid-stage clinical trial. Analysts
seemed unphased by the news. They had not factored in any revenue from the
treatment into their forecasts.
The stock lost 5 1/4 to 132 1/4.
Sub-par trading volume suggests that major holders are not overly spooked by
news. For me, the main strikes against the stock are neutral
accumulation-distribution, stalled price momentum and overhead supply (the
stock’s mid level is 164).
