Tuesday’s breakout bonanza made for good headlines, but followed an all to familiar event pattern: bailout pop… and drop? As of Wednesday pre-market, the major market indices were struggling to hold gains and slipping into the opening. With the dollar hovering around a 50 percent retrace of its recent move and looking to move higher again, stocks could face another headwind. It’s times like these that investors need to be selective with their stock scans and purchases. Two stocks that landed on my radar recently and are the focus of this weeks annotated chart column are Amgen, Inc. (AMGN) and Intel Corporation (INTC).
With the bull market reaching roughly 100% gains and economic data depicting a slowdown, it is my belief that many portfolio managers are, or will be, shifting focus from high beta/high growth stocks to large cap winners. And more specifically, to fundamentally sound large cap tech stocks with fantastic chart setups like Nasdaq 100 (NDX) names Amgen and Intel. Both stocks sport solid balance sheets with strong global growth prospects. And from a technical perspective, each has broken out of a wedge formation and has significant support below.
After a decade long chop in forgotten land, many large cap tech stocks like Intel (INTC) are overdue for investor attention. Fundamentals that make Intel an attractive investment include a forward Price/Earnings (PE) of 9.35, net cash around $10B, and a 3.3% dividend. Intel could be an acquirer as well. As seen in the chart below, Intel has broken out of wedge formation and is currently retesting a trio of support in the 21.70-22.20 area. Basing in this area is healthy and expected. But any sharp drop below 21.70 would be short term bearish, so set stops just below this area, depending on entry and risk. Overhead resistance is 24ish, and if cleared, would be quite bullish.
Another forgotten name coming to life is Amgen (AMGN). Armed with human therapeutic treatments for everything from cancer to the immune system, Amgen continues to dominate the biotechnology sector. After years of pouring cash into its pipeline to deal with patent expirations, Amgen may use future free cash flow on investors (i.e. share buyback) or acquisitions. With a forward PE of 10.70, a strong balance sheet, and an emerging pipeline of drugs, Amgen and its investors (including the likes of Carl Icahn) are looking to the future again. And fresh off of a 3 year coiled wedge breakout to new 52 week highs, Amgen looks poised for some back and fill consolidation (read: opportunity). So far, so good. A continuation of the low volume pullback should be viewed as bullish and an opportunity for new investors. Stops should be placed just below 57.
Previously published as a blog by Minyanville.
Starter positions in INTC and AMGN.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.