A lot of the ideas I post on my blogs are just that, ideas. I am not trying to sell anything and definitely not making recommendations to buy but rather just trying to educate and make those that read my blog, better investors. These “ideas” don’t always translate to investments that I would add to my client’s portfolios. Mine? Yes! My clients? No. The reason is my tolerance for risk is different than theirs. That is why everything I post is informational only and should not be treated as a recommendation.
I scan and screen hundreds of charts a week and before I put any of my client’s hard earned money to work I insure the following
1. The chart has a compelling technical reason to buy
2. The risk-reward is at least 3x
3. The investment has a good long-term outlook (not a day trade)
4. It has better performance prospects than something already owned (if not, why buy). I want to see an upward sloping ratio chart.
One that hit my radar many weeks ago that I have been patiently stalking that met all the above criteria was Amgen (AMGN). Amgen is a very well-run company in an industry (biotech/healthcare/pharma) that has excellent future prospects. From a technical aspect and looking at the chart below, there is positive divergence on both time period RSI momentum oscillators. The MACD just crossed its zero line and is moving higher. Price has been consolidating since early December and just broke out of the bull flag pattern it formed. The upside target for this moves is projected to be about 20-25% (of course the overall market has to cooperate as any sell-off may hamper this move). What gives this more credence is the moving averages are pinching which foretells of a catalyst of a big move coming (they don’t provide direction, just the setup for a big move). Finally, the performance of Amgen vs the SP500 (ratio chart in the bottom pane) has been excellent over the past 12 months (15% better performance) and is still moving higher.
With all the boxes checked, it was all I needed to add Amgen. All you model portfolio investors, welcome the new addition.