Merck & Co.
Another healthcare setup that's having some challenges right now is pharmaceutical giant Merck & Co. (MRK - Get Report). While Merck has beaten the market year-to-date, the setup that it's currently forming could erase all of those gains pretty quickly. Here's why...
Right now, Merck is forming a head and shoulders top, a price pattern that indicates exhaustion among buyers. The head and shoulders is formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head. A breakdown below the pattern's support level, called the neckline, triggers the sell signal for this stock. Just remember that until the breakdown below $42 happens, there isn't a trade to take here.
Even though the broad market is pointing up, JNJ and MRK are sporting conspicuous bearish setups. That's a big signal for investors to pay attention to, especially with scores of other stocks breaking out right now. Healthcare as a sector is looking a lot weaker than others (early cycle, liquidity-driven names are the strongest right now), so caveat emptor if you're looking at a healthcare buy before year-end.