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Worth analyzed the stock from a technical standpoint and he concluded the stock doesn't act well. In the last week, Health Care Select Sector SPDR Fund (NYSE: XLV) gained 0.7%, which was enough to beat the market. Amgen, on the other hand, dropped 2.2% and underperformed both the sector and the market.
Its monthly performance was not good either. It lost 2.1%, while XLV gained 4.2% and the S&P 500 added 1.9%. Amgen has also underperformed in the last quarter and the last 12 months. The stock has also undercut the uptrend line recently so Worth wants to be underweight or short going into the earnings report scheduled for Tuesday.
Khouw said the company has to deliver pretty good numbers to outperform the consensus. He finds it risky to consider shorting the stock because it is trading at a low price to earnings multiple.
Instead, he wants to buy the October $240/$220 put spread for $6.35. The breakeven for the trade is at $233.65 or 5.82% below the current stock price. The maximal profit for the trade is $13.65.
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