First, Pfizer reported second-quarter results in which non-GAAP earnings of 80 cents a share topped expectations by 5 cents. Revenue of $13.26 billion fell 1.6% year over year and missed analysts' estimates by $160 million. However, earnings weren't the only thing for investors to focus on, as the company also announced a merger deal with Mylan (MYL - Get Report) .
For its part, Mylan reported earnings too, beating on earnings and revenue expectations. But that's really not the focus at this point.
Mylan and Pfizer's Upjohn unit will merge in an all-stock deal. The end result will leave Pfizer shareholders owning 57% of the combined entity, with Mylan shareholders owning the other 43%. It's no surprise Mylan is Real Money's Stock of the Day.
The companies are hoping to spur some growth -- Mylan's revenue grew just 1.3% in the quarter, while Pfizer's revenue declined as the generic drug business continues to see pricing pressure.
While Mylan stock is understandably jumping higher, up more than 12% in midday trading, Pfizer stock closed lower by almost 4%. Let's look at the chart to see where the latter may be heading.
Trading Pfizer Stock
Pfizer stock has been trading in a relatively tight range over the past 12 months. With a 52-week low of $38.07 and a 52-week high of $46.67, the stock has been trapped in an ~$8 range for most of the past year.
So far on Monday, Pfizer stock has a high of $43 and a low of $41.75. That low is below the stock's open, which comes right near the 200-day moving average at $42.14.
It would be discouraging for PFE stock to close below the 200-day moving average, and bearish for it to take out Monday's $41.75 low. Below that mark increases the odds that Pfizer stock will test the 61.8% retracement for the one-year range, down at $41.28. If that fails to support the stock, a decline down to the $40 level is possible.If Pfizer stock can maintain above the 200-day moving average, investors will want to see it reclaim the 50% retracement at $42.27. Above that opens up the stock to an important test of the $42.80 to $43 area. There it will find both the 20-day and 50-day moving average.
Clearing this area is essential for Pfizer stock to retest the top of its range near $44.50.