Good evening. The results of my scanning this weekend provided very little opportunities for long trades. I looked at several hundered charts and was unenthused with prospects to the long side. However, I did find a few in the pharmacuetical space and have chosen to release MRK below. I'll also share some additional trade set-ups with you that I think have some potential.
Long STP - The stock broke out of resistance near $10.50 and continued higher on Friday. I would look for the stock to retrace some of the gains and look for an entry near the broken resistance around $10.65. If it does the stock has some room to run up to $11.50 to $12.00 before any real resistance.
Long C - I like C as a speculative long play. The government has been selling its stake and when the selling begins to wane C could be in for a sustained run higher. If C breaks above $4.07 it could see see $4.50 to $5.00 fairly quick.
Long DF - The stock looks like it is ready to break out of resistance near $11.10. If it does there is a lot of clear air overhead with little resistance. There has been a big institutional seller of this stock over the past year which has beat it down. It is cheap now and looks ready to bounce higher, possibly up to $12.50 and then $14.00.
NEW DIRECTIONAL CALL PLAYS
Merck & Co - MRK - close 36.30 change +0.44 stop 59.38
Merck & Co., Inc. (Merck) is a global health care company that delivers health solutions through its medicines, vaccines, biologic therapies, and consumer and animal products, which it markets directly and through its joint ventures. The Company's operations are principally managed on a products basis. The Pharmaceutical segment includes human health pharmaceutical and vaccine products marketed either directly by the Company or through joint ventures. Human health pharmaceutical products consist of therapeutic and preventive agents, sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions.
Target(s): 37.95, 38.60, 39.35
Key Support/Resistance Areas: 39.50, 38.75, 38.00, 36.35, 35.80,
Time Frame: 1 to 2 weeks
Why We Like It:
MRK is building an ascending triangle on its daily chart with resistance near a key pivot level for the stock at $36.35. The stock formed a bullish inverse head and shoulders pattern that began with the left head in April (see large ovals on chart). If MRK trades above Friday's highs there is little resistance until about $38.00. Earnings are at the end of July and I expect this stock to make a run. I suggest we use any weakness to initiate long positions or a break above Friday's highs, whichever occurs first. The stock has closed above its 100-day, 200-day, and 20-day SMA's which are all converging so I don't expect too much pullback from here. Let's use a trigger of $36.50 and $35.85 to initiate long positions. Our stop will be $24.79 which is below all of the aforementioned SMA's and the lows from 6/21 and 6/23.
Suggested Position: Buy August $36.00 CALLS if MRK trades $36.50 or $35.85, whichever occurs first, current ask $1.40
Entry on July xx
Earnings Date 7/30/10 (unconfirmed)
Average Daily Volume: 18 million
Listed on 7/10/10