The question is now: Can Merck race to all-time highs after its third-quarter results?
The charts are setting up nicely for bulls who are hoping for a fourth-quarter run. Shares continue to hold support and just have a bit of overhead resistance between the current stock price and new highs.
Of course, a solid quarterly result helps tip the scale in situations like this. Earnings of $1.51 per share beat estimates by 27 cents, while revenue of $12.4 billion grew 14.9% year-over-year and smashed expectations by more than $800 million. Further, the company gave a significant boost to its full-year revenue and non-GAAP earnings outlook.
That's not to say that Merck will hit new highs solely because of its quarterly results, but the report will certainly give the edge to the bulls. Let's take a closer look at the charts and highlight some of the important levels.
Trading Merck Stock
Merck stock may not be exploding higher like Biogen (BIIB) - Get Report was earlier this month, but it's making its way higher. Above is a year-to-date daily chart for Merck, which highlights how well it's done. Shares have risen more than 21% over the past 12 months.
You may also notice how each major dip has been bought. Whenever Merck stock drops down to its 200-day moving average, buyers step in and bid it higher. In fact, that happened on Monday as well, the last trading session before Merck's report.
On the chart above, it's clear that $85 has been strong resistance for the past two months. If MRK stock can hurdle this mark, it will be a significant feat in the intermediate term.
Also notice how Merck stock has reclaimed both the 50-day and 100-day moving averages, as well as the 78.6% retracement on Tuesday's post-earnings rally. Below the latter -- the lowest of the three -- and Merck stock may be in trouble. It will likely bring up another test of the 200-day moving average.
The setup now become simple. To get to new all-time highs, MRK stock needs to first clear $85 resistance. Above that and $86.50 is on the table, while the current high sits up at $86.77. Over that and new highs are the reward. Below the 78.6% retracement at $82.81 and investors should be more cautious on MRK stock.
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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.