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Anatomy of a Monster Stock: AMGN

|Includes:Amgen Inc. (AMGN)

In order to find the Monster Stocks of the future you must first know what to look for.  Without a doubt, the best way to do this is to study history’s biggest winners and to become as intimately familiar with their characteristics as possible.

AMGN announced earnings yesterday and, going back over its chart out of boredom, we were reminded of just what a true Monster this was in the early 90’s.  Back in 1990, for example, AMGN was the established leader in the Medical-Biomed/Biotech industry, which at the time was a leading industry group in the market.  By the time the stock topped in early 1992, AMGN had climbed well over 700%.  Now those are the kind of returns we can live with!

So let’s take a closer look at this past Monster:

AMGN’s first-stage base was a double bottom that completed in February of 1990.  It also had a couple of interesting characteristics.  First, one could have gotten an early start in the stock as something rare occurred: a plus-three buy point.  On 2/8 AMGN shot through $26.54 (3 points above the low of the first bottom) on big volume.  That would have given an investor a nice cushion right away.  Plus-threes don’t happen all that often, but when they do the nimble investor would be wise to capitalize on it.  The second rarity was that a short handle formed, offering investors another alternate buy point to the middle of the “W.”  Once again, AMGN passed the pivot ($27.25, the high of the handle plus ten cents) on an impressive surge in volume on 2/15, closing at the highs of the session.  It ultimately rose above the buy point in the middle of the “W” ($27.97) on another surge in volume on 2/21.

AMGN#2

(Something else of note: after that 2/15 breakout, the stock tested though never traded below the high of the handle: $27.15.  Incredibly, it touched that exact price four times over the span of five sessions yet held it.  That’s what a clue that the big boys are at work looks like.)

AMGN#1

The stock quickly went on form a flat base from about the middle of March to mid-May.  Here is a good example of why one should never give up on a stock.  Even if you miss a stock’s breakout, keep an eye on it.  It can go on to afford another prime opportunity to get in, but only if you are paying attention.

AMGN.FlatBase

After breaking out of the flat base AMGN ran about 50% before forming a cup without handle from roughly mid-September to mid-November.  The strength of the stock from there is illustrated by the fact that AMGN didn’t touch the 50 day moving average again until May of the following year (1991).

AMGN.CWOH

AMGN.CWOH.Daily

From there AMGN formed yet another double bottom, yet by this time its trading had become a little more wide and loose.  That's a big red flag....

AMGN.DB.Weekly

AMGN.DB.Daily

By the time AMGN’s fifth base rolled around (a sloppy-looking cup with handle) the stock’s run was getting more than long in the tooth.

AMGN.CWH.Weekly

AMGN had an amazing 24-month run.  By now the stock was universally loved and its “story” promised blue skies as far as the eye could see.  It’s just when enthusiasm for a stock is at a fever pitch that the prudent investor should be looking for the classic sell signals which will allow him to exit with the bulk of his profits.  There’s no need to nail the absolute top.  As Bernard Baruch said: “I made my money by selling too soon.”

AMGN.UTL

Disclosure: No Position
Stocks: AMGN