AMGEN LEADS BIOTECH GROUP IN BULLISH BREAKOUTS -- BIOTECH ISHARES CLEAR 200-DAY AVERAGE

BIOTECH INDEX EXCEEDS 2004 HIGH... Chart 1 is an updated version of a similar chart that I showed on May 9 (May 09, 2005) which described the Biotechnology Index (BTK) as being in the latter stages of a bullish "symmetrical triangle". [A symmetrical triangle is identified by the two converging triangles and is usually a continuation pattern]. That pattern suggested that a move to new highs was likely. On June 20 I showed the BTK challenging its 2004 high which is now being broken. That earlier message suggested a couple of ways to participate in the biotech rally (June 20, 2005). One of the ways was to purchase a biotech stock like Amgen. My choice of Amgen was based on its attractive chart pattern and the fact that it's considered to be the bellwether of the biotech group.

Chart 1

AMGEN BREAKS OUT ... Back on June 20, I showed Amgen just starting to bounce off its 50- and 200-day moving averages on rising volume. Its relative strength ratio was just starting to turn up as well. Sharp price gains over the last two days have pushed the biotech bellwether through its early June high to the highest level since February. The green volume bars since mid-June reflect good buying power. Its relative strength ratio is getting even stronger. The next price target for Amgen is its January high just over 65. That resistance barrier can be seen more clearly in the weekly bars in Chart 3. Chart 3 also show that Amgen has been forming an apparent "head and shoulders" bottom since the end of 2003. That bullish pattern is identified by three troughs (circles) with the middle one (the head) lower than the two "shoulders". The neckline is the line drawn over the 2004-2005 highs. A decisive close above that neckline completes the pattern and would signal a likely test of the stock's mid-2003 peak near 72. Given its huge size, a bullish breakout in Amgen would also have a bullish impact on the various biotech ETFs.

Chart 2

Chart 3

BUYING BIOTECH ISHARES ... Of the two biotech ETFs currently offered, this is the one that I described on June 20 as being the cheaper and less risky. And it too is having a good chart day. Chart 4 shows the Biotech iShares (IBB) trading over their 200-day moving average for the first time in nearly five months. [Amgen is the biggest holding in the IBB]. Its green volume bars are starting to show a bullish pattern. [The IBB is also the more liquid of the two biotech ETFs]. The relative strength ratio (versus the S&P 500) is also close to an upside breakout. That's a good combination. And, as I suggested back on June 20, upside breakouts in the biotech group should also give a boost to the healthcare sector.

Chart 4