The time of truth for Amgen (AMGN) in the aftermath of its vertical decline from the Jan 25 high at 58.19 to its February 24 low at 50.61.

Let's notice that on the enclosed weekly chart that last week's violation of a near two-year support line at 52.60 followed-through to the downside to 50.61 last Thursday, but then AMGN reversed powerfully to the upside -- perhaps in reaction to positive news about its phase 3 study on cancer drug XGEVA.

From a technical perspective, the sharp recover back to 52.67 earlier today leaves behind a potential weekly Bear Trap within a huge sideways, contracting pattern off of the high from September 2008 at 66.51. All of the price action since that time represents a digestion period of the powerful upleg from the March 2008 low at 39.16 to 66.51, which should be followed by another powerful recovery upleg when the digestion period is complete.

As long as the 50.60/50 area contains any forthcoming weakness, AMGN is ready for a powerful upside continuation move.

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.