Trading Guidelines for Amgen, Biogen Idec, Gilead, 3 Other Biotechs

NEW YORK (TheStreet) -- Investing in biotech is not for the faint of heart. Stocks in the sector are volatile, depending on positive or negative reports from the U.S. Food and Drug Administration on drugs in the companies' pipelines.

Each of six biotech stocks profiled here have market capitalizations above $30 billion and have solid year-to-date gains led by Gilead Sciences (GILD)  , which is up 44% and Regeneron (REGN)  , which is up 29%.

 

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In July, Federal Reserve Chief Janet Yellen said that valuations were stretched for smaller firms in the social-media and biotechnology industries. Today's stocks are not small, but four have elevated 12-month trailing price-to-earnings ratios.

As a technical warning, all six weekly charts have parabolic bubble characteristics. 

Here are the profiles and two 'crunching the numbers" tables follow.

Alexion Pharmaceuticals  (ALXN) ($165.66) has a P/E of 39.6 and is just above its five-week modified moving average of $165.43. The stock set an all-time intraday high at $185.43 on Feb. 25, and declined 26% to an intraday low at $136.37 on April 15. Quarterly and semiannual value levels are $151.25 and $146.58, respectively, with a weekly pivot at $167 and semiannual and monthly risky levels at $176.80 and $195.26, respectively.

Amgen  (AMGN) ($139.19) has a P/E of 17.3 and is above its five-week MMA of $132.15. Amgen went as low as $108.20 on April 28, and then rose 29% to an all-time intraday high at $139.93 on Sept. 2. Monthly and semiannual value levels are $134.70 and $120.57, respectively, with a quarterly pivot at $139.16 and a weekly risky level at $141.21.

Biogen Idec (BIIB) ($332.08) has a P/E of 29.6 and is just above its five-week MMA of $331.22. The stock set an all-time intraday high at $358.89 on March 19, and then declined 24% to an intraday low of $272.02 on April 15. Semiannual and annual value levels are $264.82 and $196.91, respectively, with a semiannual pivot at $330.42 and quarterly and monthly risky levels at $335.73 and $365.23, respectively.

Celgene  (CELG) ($94.09) has a P/E of 31.6 and is above its five-week MMA of $90.63. Celgene traded as low as $66.85 on April 15, and then rose 44% to an all-time intraday high at $96.44 on Sept. 2. Monthly and semiannual value levels are $91.10 and $81.17, respectively, with a quarterly risky level at $100.59.

Gilead Sciences ($108.22) has a P/E of 19.2 and is above its five-week MMA of $99.85. Gilead sank as low as $63.50 on April 11, and then rose 75% to an all-time intraday high at $110.64 on Sept. 3. Monthly and quarterly value levels are $98.28 and $93.92, respectively, with a weekly pivot at $107.87.

Regeneron ($354.32) has a P/E of 45.8 and is above its five-week MMA of $337.85. Regeneron fell as low as $269.50 on June 27, and then rose 37% to an all-time intraday high at $369.31 on Sept. 2. Semiannual value levels are $321.97 and $256.30 with a weekly pivot at $353.41 and monthly and quarterly risky levels at $358.50 and $381.86, respectively.

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Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics

This table provides the technical status for the stocks profiled in today's report.

I show the 12-month trailing price-to-earnings ratio.

There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.

The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.

Interpretations: Stocks below a moving average are listed in red.

Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.

A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.

A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.

A stock with a neutral technical rating has a profile that is not positive or negative.

The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three to five year horizon.

The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.

The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.

The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six- to 12-month horizon.

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Crunching the Numbers with Richard Suttmeier: Earnings & Where to Buy & Where to Sell

Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.

Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.

At the time of publication, the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

 


TheStreet Ratings team rates AMGEN INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMGEN INC (AMGN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, revenue growth, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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