Real Money Charts (March 31, 2008)
Today’s chart requests are: MRK, BMY LLY, JNY, RF, and RSX.First, let’s look at some big Pharma companies — MRK, BMY and LLY. If you think this sector is defensive, then I’d suggest going on offense. This group is a mess!
This weekly chart of MRK shows a stock that’s bouncing off of early 2007 levels. But notice how the 30-week moving average is now moving lower. That makes MRK a “sell on rallies” stock, not a “buy on dips” stock. And if the stock falls below $40, I’d be a “sell on dips” trader.
BMY just continues to bleed lower. The stock remains well below the 50-day moving average, even on rallies. That’s indicative of a stock that is under heavy distribution. The easy money on the short side has already been made. But I sure wouldn’t be a buyer until the stock starts trading above its 50-day moving average.
LLY has been all over the place over the past several months. Notice how the stock has printed a high well above the 50-day moving average in January, and lows well below the 50-day moving average in November and March. This is the type of volatility that nimble traders love. Unfortunately, not all traders are nimble. So let’s just use the 50-day moving average as our reference point. Lately, each tag of the 50-day moving average has been the time to sell. So if you’re intent on buying LLY, don’t do it now! Also, the stock is close to testing a support level at $49. If the stock falls below that level, I’d sell.
While the mid-February rally went well above the 50-day moving average in this daily chart of JNY, the other tests of this key moving average have failed. With each rally, sellers have used the 50-day moving average as their reference point for dumping stock on the bulls. I’ve drawn support just a bit below $13. If that level fails to hold, I’d sell.
RF is trying to hammer out a base, but there has just been no follow through on any rally. While the 50-day moving average is just starting to move higher, I’d bide my time until the stock starts trading above that level. Remember — this is a financial stock. Need I say more?
RSX is a Russia ETF that’s been trading in a very wide range for a while. But I’ve highlighted the lower highs and higher lows that define resistance and support. If you’re considering buying the RSX, why not wait for a breakout above resistance to around $50. That way, you’ll have a better chance of avoiding the congestion.
Be careful out there.
Real Money