Amgen Showing Signs Of Strength

Excerpt from the FOMC’s statement:

#FOMC: `Labor market has continued to STRENGTHEN and that economic activity has been rising at a STRONG rate. Job gains have been STRONG, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown STRONGLY.’

Let’s consider Amgen, Inc. (ticker: AMGN):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on July30th.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN the same day.  This indicator measures strength and weakness for a 48-hour period, in this case strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further upside momentum.  I want to play the VP bullish indication.

Strategy Discussion

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  The first thing that you want to do is calculate your target price.  In order to perform this calculation, you need three pieces of information:  current price, expiration date and the implied volatility for that expiration date.  For AMGN this calculation yields a target strike of ~$205.50.  You may want to consider the AMGN August 17th regular monthly expiration 200/202.5 call spread, buying it for $0.50.  The most you lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.50 and max reward = $2.00.  This means that you are getting odds of 4.00:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.