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Amgen Stock in Trouble, Despite Strong Results

Amgen Inc. (NASDAQ:AMGN) reported its full year 2017 results on February 1st. On a non-GAAP basis, the California-based biotech giant earned $12.58 per share, an 8% increase from 2016. But instead of celebrating another year of strong business performance, investors punished Amgen stock, which fell from an all-time high of $201.22 to $168.45 between January 29th and February 9th.

The selloff was probably driven by the company’s earnings miss in the fourth quarter. Or maybe it was the poor guidance for 2018. In our opinion, investors only used these as an excuse to get rid of the stock. The real reason for the decline, we believe, was the market itself, which was already anticipating bad news by the time Amgen’s report became public. Trouble is, the Elliott Wave Principle suggests this was just the beginning of an even bigger pullback.
amgen stock weekly elliott wave analysis
The weekly price chart of Amgen stock shows that the uptrend from $39.16 to $201.22, which has been under construction for almost 10 years since March 2008, took the shape of a five-wave impulse, labeled (1)-(2)-(3)-(4)-(5). Wave (3) is extended, but the five sub-waves of the ending diagonal pattern in wave (5) are also visible.

The bad news for Amgen stock investors is that according to the Wave principle, this pattern should be followed by a three-wave decline, whose targets lie near the support area of wave (4). Wave (4) ended at $130.09 in late-September, 2015. With the stock currently at $182, we can expect another $50 to disappear from the share price. To reinforce the negative outlook, the MACD indicator shows a bearish divergence between waves (5) and (3). Now let’s take a closer look at Amgen stock’s post-earnings drop.
amgen stock hourly elliott wave analysis
Unfortunately, the hourly chart only tilts the table even more in the bears’ favor, by revealing the impulsive structure of the plunge to $168.45. Impulses point in the direction of the larger sequence, which in this case tell us that Amgen stock’s weakness is likely to continue. The weekly and hourly charts point in the same direction, so as long as the top of wave 5 of (5) at 201.22 holds, the bulls’ resistance remains futile.

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