8% gain on $AMLN (technical review of recent swing trade)

On June 28, subscribers of The Wagner Daily were alerted to a potential breakout entry in Amylin Pharmaceuticals ($AMLN). Based on our swing trading strategy, we liked the tight consolidation in AMLN at the highs, which held above the 20-day EMA. Holding above the 50-day MA is tough enough when the market is in a correction, so any stock that holds above the 20-day EMA is showing extreme relative strength. We also liked the declining volume during the formation of the base, which is a bullish sign. The buy entry was simply over the three-day high:

On June 29, AMLN triggered our buy entry in our swing trade newsletter as it broke above the three-day high; however, the price action failed to impress as it closed back below the three-day high on the day of buy entry. On Monday, July 3, the price action gapped about 10% higher on news that AMLN was acquired by Bristol Myers Squibb ($BMY). Our exit price is shown on the chart below:

Obviously, it sometimes helps to have a little luck on your side, as we were able to sell into the morning gap up and lock in a quick 8% gain on a two-day hold. Nevertheless, when we take a trade based on technical analysis and our swing trading strategy, we always try to stack the odds in our favor. This is accomplished by identifying top industry groups, locating bullish chart patterns near 52-week highs, and waiting for low-risk entry points to develop. Good things tend to happen when we follow this simple formula.