Has Amgen Reached Downside Exhaustion?

Amgen (AMGN) opened Friday with a huge breakdown gap.  This Enbrel-driven collapse dropped shares over 7% on the bell.  By the end of the session AMGN had lost nearly 9.5% taking out multiple support zones along the way. 

The stock has drifted lower since and with today's early weakness is beginning to test an important area.  For patient investors a low risk entry opportunity may be developing.

As AMGN began to retreat from the $176 area in late September, an ominous double top was left behind. Four weeks later the stock had returned to its 200-day moving average after a 10% drop.  This key support zone included the stock's June high. 

Heading into Friday morning's third-quarter earnings report AMGN appeared to firming up nicely after regaining its footing near its 200 day moving average. The plunge that followed the Enbrel news was a quite a reversal, one that will take some time to recover from.

As October came to a close, AMGN fell below the June/Brexit low. In the early going Tuesday the stock has dipped even further and appears to be showing some signs of stabilization after reaching the upper band of a major support zone.  This key area has held important monthly lows including the August 2015 bottom as well as the February and March lows of this year. 

Slightly below these monthly lows is AMGN's 40 week-moving average just above $137.  This long-term indicator has not been tested since December 2012. Back then the December 40-week moving average test proved to be a major bottom. 

In the near term, patient AMGN investors should keep a close eye on the $140 to $137 area. If the stock can build a base in this zone a significant rebound could develop after a 20% drop from the 2016 highs.

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