Merck Beats Earnings, the Stock Remains Below 200 Day SMA

Merck & Co., Inc. (MRK) beat quarterly earnings estimates before the opening bell, on the 28th of April, and the stock remained below its 200-day simple moving average (SMA) at $83.79. The stock ended last week below its monthly risky level for May, to $79.44.

The pharmaceutical giant and component of the Dow Jones Industrial average beat earnings estimates for the 25th consecutive quarter, and the stock is relatively cheap. Merck has a P/E ratio of 14.51 with a dividend yield of 3.08%, according to the trends.

The stock closed last week at $79.34, down 12.8% year to date, and in the correction of a territory to 14.4% below its 52-week high of $92.64 together on Dec. 20, 2019. The stock is also in the bull market territory, up 21.8% above its March 23rd low of $65.25.

The daily chart for Merck

Refinitiv XENITH

The daily chart for Merck indicates that the stock has been under the influence of a gold cross, which was confirmed on June 12, 2018, when the 50-day SMA rose above the 200-days SMA to indicate that higher prices will follow. The chart shows that the 200-day SMA held on the weakness between Sept. 10 and Oct. 28, which led to the Dec. 20 to $92.64.

Merck’s stock began to 2020 above its semiannual and annual pivots at $89.34 and $89.87, respectively, but remained below its quarterly risky level, which is above the graph of $101.99. The stock began to cascade down on Jan. 23 when these levels is not required.

It has broken below its 200-day SMA on Feb. 12, which led to the March 23 low of $65.25. The rebound was a return to the 200-day SMA between 17 April and 27 April, which was followed by weakness below its monthly pivot for the month of May to $79.44.

The weekly chart for Merck

Refinitiv XENITH

The weekly chart for Merck is neutral with the stock below its five-week modified moving average of $79.61. The stock is above its 200-week SMA, or the return to the average, to $69.74. The 12 x 3 x 3 weekly slow stochastic reading is spent 56.62 last week, an increase of 51.03 on April 24.

Trading strategy: Buy Merck stock on the weakness of the weekly value level at $73.09 and reduce the holdings on the strength of the 200-day simple moving average at $83.79.

How to use my value levels and risky levels: The closing price on Dec. 31, 2019, were inputs to my proprietary analytics. Half-yearly and annual, the levels are still on the charts. Each calculation uses the past nine closes in these time horizons.

The second quarter of 2020 the level has been established based on the 31 March, close by, and the level of the month of May was established based on the April 30 close. New weekly levels are calculated following the end of each week, and new quarterly levels occur at the end of each quarter. Half-yearly levels are updated in the middle of the year, while the levels remain in play throughout the year.

My theory is that nine years of volatility between the farm are to assume all possible bullish or bearish event for the stock are taken into account. To capture the volatility of stock prices, investors should purchase shares of the weakness of a plan, the value and reduce the holdings of the strength to a risky level. A pivot is a level value of the risk level that was violated in its time horizon. Hubs act as magnets that have a high likelihood to be re-tested prior to their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings has been based on the backtesting of many methods of reading the stock prices of the momentum with the objective of finding the combination that resulted in the least number of false signals. I’ve been following the stock market crash of 1987, so I was happy with the results of more than 30 years.

The stochastic reading covers the duration of 12 weeks, high, low, and close for the stock. There is a row of calculation of the difference between the highest and the lowest compared to the farm. These levels are modified for a fast reading and slow reading, and I found that the slow playback will work best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered as overbought and readings below 20.00 regarded as oversold. A reading above 90.00 is considered to be a “swell parabolic bubble” of the training, which is usually followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered to be “too cheap to ignore,” which is usually followed by a gain of 10% to 20% over the next three to five months.

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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.


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