Pharmaceutical giants Merck & Co Inc.  (MRK) - Get Report and Pfizer Inc.  (PFE) - Get Report were two of the stronger performing components of the Dow Jones Industrial Average in 2018 but are laggards so far in 2019. The first technical warnings occurred on Dec. 4, when both set multiyear highs. This day was a downside "key reversal" for both where the day's closes were below the prior day's lows.

Both companies report quarterly earnings next week and face deteriorating daily and weekly charts just as BMO Capital Markets downgrades Merck and UBS downgrades Pfizer.

Merck closed Thursday at $73.17, down 4.2% so far in 2019 but still in bull-market territory 38.5% above its April 3, 2018 low of $52.83. The stock is 8.8% below its Dec. 4 multiyear high of $80.19. The drug company has a P/E ratio of 17.63 and offers a dividend yield of 2.92% according to Macrotrends. Analysts expect Merck to earn $1.03 a share when they report earnings before the open Friday, Feb. 1.

Pfizer closed Thursday at $40.43, down 7.4% so far in 2019 but still in bull market territory 21.8% above its Oct. 29, 2018 low of $33.20. The stock is in correction territory 13% below its Dec. 4 multiyear high of $46.47. The drug company has a P/E ratio of 14.15 and offers a dividend yield of 3.23% according to Macrotrends. Analysts expect Pfizer to earn 63 cents a share when they report earnings before the open on Tuesday, Jan. 29.

Both Merck and Pfizer were members of the "Dogs of the Dow" in 2018. Merck was the best-performing dog with a gain of 35.8% for the year, with Pfizer second best on a gain of 20.5%. Merck was booted from the dog pound for 2019 as its dividend yield began the year  below 3.00% at 2.91%. Pfizer remains a member of the 2019 version of the "Dogs of the Dow" with a dividend yield of 3.30% as the new year began.

The Daily Chart for Merck

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Courtesy of MetaStock Xenith

The daily chart for Merck shows that a "golden cross" formed on June 13, 2018 when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices lie ahead. This positive was in play when the stock set its 2018 high of $80.19 on Dec. 4. Note the daily "key reversal" on that day when the close of $78.21 was below the Dec. 3 low of $78.28. The 2018 close of $76.41 was input to my proprietary analytics and resulted in three horizontal levels as shown on the chart. My semiannual value level is $67.68 with a quarterly pivot at $71.54 and annual risky level of $76.46.

The Weekly Chart for Merck

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Courtesy of MetaStock Xenith

The weekly chart for Merck is negative with the stock below its five-week modified moving average of $74.78. The stock is well above its 200-week simple moving average or "reversion to the mean" at $60.46. The 12x3x3 weekly slow stochastic reading is projected to fall to 61.36 this week, down 67.07 on Jan. 18.

Given these charts and analysis, buy weakness to my semiannual value level of $67.68 and reduce holdings on strength to my annual risky level at $76.44. Aggressive buyers can buy at my quarterly pivot of $71.54.

The Daily Chart for Pfizer

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Courtesy of MetaStock Xenith

The daily chart for Pfizer shows that a "golden cross" was confirmed on July 16, 2018 when the 50-day simple moving average rose above the 200-day simple moving average indicating that higher prices lie ahead. This positive was in play when the stock set its 2018 high of $46.47 on Dec. 4. Note the daily "key reversal" on that day when the close of $45.14 was below the Dec. 3 low of $45.76. The 2018 close of $43.65 was input to my proprietary analytics and resulted in three horizontal levels as shown on the chart. My semiannual pivot is $41.49 with quarterly and monthly risky levels of $43.71 and $46.71, respectively. The 200-day SMA at $40.43 is the key level to hold on weakness.

The Weekly Chart for Pfizer

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Courtesy of MetaStock Xenith

The weekly chart for Pfizer is negative with the stock below its five-week modified moving average of $42.65. The stock is well above its 200-week simple moving average or "reversion to the mean" at $35.20. The 12x3x3 weekly slow stochastic reading is projected to fall to 36.47 this week down from 40.64 on Jan. 18.

Given these charts and analysis, buy weakness to my semiannual value level of $67.68 and reduce holdings on strength to my annual risky level at $76.44. Aggressive buyers can buy at my quarterly pivot of $71.54.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.