First up is pharma giant Merck (MRK - Get Report), a stock that's having a solid run in the past six months. Shares of the $117 billion drugmaker are up close to 17% over that time. A technical pattern in shares right now points to even more upside in shares.
The pattern to watch in Merck is an ascending triangle, a formation that's identified by horizontal resistance to the upside of shares at $39 and uptrending support below. Essentially, as MRK bounces in between those two price levels, it's getting squeezed closer and closer to a breakout above resistance; that breakout above $39 is our buy signal.
The ascending triangle in MRK tells us two important things: first, resistance indicates that there's a glut of supply of shares at the $39 level. In other words, $39 is a price where sellers have historically been more eager to sell and take gains than buyers were to buy. The other important factor in the ascending triangle is uptrending support -- it tells us that, at this point, buyers are in control of shares. The high-probability trade comes when that glut of supply gets absorbed and shares push through that price level.Even though Merck isn't a strictly textbook setup, the trading implications of those two levels look strong. When MRK breaks out above $39, I'd suggest putting a protective stop in just below the 50-day moving average. Merck shows up on a list of 10 Dividend Stocks Held by Highly Rated Fund Managers.