Amgen (AMGN), a big biopharma stock, broke out with expanding volume in July and hit a new 52-week high. After becoming short-term overbought, the stock fell back to the breakout zone. There are two things to note here. First, broken resistance turns into the first support zone. Second, a pullback to a resistance breakout is known as a "throwback". It is viewed as a test of the breakout, and a strong breakout should hold. The stock is showing signs of support with two bullish engulfing patterns in the last five trading days. Look for a follow through break above 171 to confirm the bullish engulfing patterns.
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About the author:Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.