Here's When You Should Buy Merck

A pullback for Merck will lead to lower entry opportunities.
By Gary Morrow ,

Earlier this month, after extending its post-Brexit rally to 7%, Merck (MRK) - Get Report entered a major resistance zone. This area between $59 and $60 now appears to be holding, and a pullback is about to begin.

As this next phase develops, patient investors will be rewarded with lower entry opportunities.

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Merck began this month with an upside breakout. The stock closed July 1 with a modest gain, but it was just enough to push shares through an overhead trend line and into new 2016 high territory. Two sessions later, on July 6, Merck surged over 2%, filling a major breakdown gap in the process. The stock has been struggling to make further gains as upside momentum eased. As a new week begins overhead pressure is increasing with the help of a downgrade from BMO.

For patient Merck bulls, this combination will provide a low-risk entry opportunity. In the near term, investors should focus on the $57.85-to-$56.85 area. This solid support zone includes the April, May and June highs. A new base in this area ahead of Merck's July 29 earnings report could set the stage for a fresh rally leg.

Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long MRK.

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