Stocks Resist Decline in 2025: Amgen at $250 and Cannabis Stocks on the Rise
Explore how the Balance of Power indicator signals potential rebounds in stocks like Amgen and the recent surge in cannabis stocks, highlighting market trends ahead of the Fed's policy update.
Gordon Scott brings over 20 years of experience as an active investor and Chartered Market Technician (CMT), offering expert technical analysis.
Market Overview in 2024
Following last week's recovery, major indices experienced slight declines. The S&P 500 (SPX), Nasdaq 100 (NDX), and Dow Jones Industrial Average (DJX) each slipped by more than 0.3%, while the Russell 2000 (RUT) dipped a modest 0.2%. This subtle pullback suggests that savvy investors may be seeking attractive entry points amid market hesitation.
With the Federal Reserve's monetary policy announcement scheduled for Wednesday, market participants are cautious, awaiting clarity before making decisive moves. This environment creates volatility driven by short-term traders, making it challenging for individual investors to navigate.
Among various tools, the Balance of Power (BOP) indicator stands out for its ability to identify moments when stocks may be oversold and poised for a rebound. This indicator calculates the ratio of the difference between the session's open and close to the range between high and low, effectively measuring buying and selling pressure.
Analyzing the S&P 500 over the past four months, low BOP scores have frequently preceded profitable mean-reversion trades within a week. Green markers on the chart below highlight successful entry points, while red markers indicate less favorable outcomes.
Amgen (AMGN) at $250: A Detailed BOP Indicator Case Study
Using Investopedia's interactive charts, we examine Amgen, Inc. (AMGN) and its BOP readings over the last year. Whenever the indicator dips below -0.7, it signals a potential short-term oversell, suggesting a buying opportunity.
The chart below marks these instances with green arrows for profitable trades initiated at the next day's open and held for five days, and red arrows for losses. This tool can help investors identify when a stock's price drop may be driven by temporary factors rather than fundamental weakness.
Related reads:
• 5 Reasons Stocks Soaring 25% Can Rise Even Higher in 2024
• Understanding the "Random Walk Theory" for Investors
• Why Charles Schwab Stock Is a Top Pick This Year
Cannabis Sector Gains Momentum: Canopy Growth Corporation (CGC) Breaks Six-Month Slump
Investors seeking growth in cannabis stocks have faced challenges over the past year. However, Canopy Growth Corporation (CGC) recently posted its most significant price increase in six months, potentially signaling renewed interest from institutional investors.
Conclusion
As the market cautiously awaits the Federal Reserve's upcoming announcement, stocks have pulled back slightly from resistance levels. Utilizing the Balance of Power indicator can help identify stocks that may be oversold and ripe for recovery, such as Amgen at $250. Meanwhile, emerging strength in cannabis stocks like Canopy Growth Corporation suggests potential new opportunities in the sector.
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