Here’s the low down on Merck. (July 10, 2012)
MRK
I’m Dan Fitzpatrick at StockMarketMentor.com on Tuesday, July 10th. In this free video we’re going to look at Merck ( $MRK Merck & Co., Inc. ). Dividend yield, four percent that’s pretty. A lot of the pharmaceuticals are up in the high threes, Merck ( $MRK Merck & Co., Inc. ) is finally at four. So are you going to buy the stock even though, it looks to me, like it’s pulling back? I mean we almost have a bearish engulfing pattern, not quite, but almost, if the stock had actually gapped up above yesterday’s range, like right to there, and then did what it did, well this would be really, really bearish. As it is it’s just a really bearish, like I don’t want to buy this stock right now because it’s down almost two percent today. However, does that mean the run is over? Remember, four percent, that’s fine if you’re going to hold the stock for a year you get paid four percent for doing that. I guess it’s better than a U.S. Treasury; in fact it’s probably safer than that too; however if the stock declines 10 percent, well that four percent doesn’t really get you much does it? So you have to look at the price chart, you can’t just go, you know, snapping at a four percent yield on a Dow component just because somebody tells you do that. Stop and think for a minute, stop and look. We’ve got the stock that’s come out of this range, it looks like it’s totally been overdone and should now pull all the way back to here, right? Okay, maybe, but look at the weekly chart. Weekly chart? You can see it’s been consolidating for like two years. This year, look how tight the Bollinger Bands are here; it’s a little volatility squeeze. Stocks start blowing out on increasing volume, increased volume not increasing. The volume is actually kind of declining now, which is typically what you’re going to see when a stock like this breaks out. So it’s in a volatility squeeze, in the first phase of expansion, and that does this, let’s just mark this thing out so we have our plan. Here’s the squeeze, members, I know I talk about this all the time, you’re going to hear me talk about it once more. First phase is the breakout, the second phase is the test of that break out; that test could come all the way back down here; this might be it, I doubt it, and then the stocks moving higher or the stock can come all the way back down and absolutely fail the test. The breakout turned out to be a fake out; you don’t want to buy the stock. Happily, we don’t have to make that determination right now, instead we just know that this phase one, the initial break out, is over; now we’re going to watch and see how this stock acts. Will the stock continue to fall a bit more? I believe that it will, but probably not too much more unless we get a major implosion in the market in general. Why not? Well, because this is about as defensive as it gets; I mean we got the Affordable Care Act or whatever it’s called, that’s now going to be going into effect. Well, guess who benefits? Merck ( $MRK Merck & Co., Inc. ), Pfizer ( $PFE Pfizer Inc. ), all the other drug companies who were secretly, you know, in bed with this whole thing from day one. That’s not a political commentary guys, that’s a market commentary. The druggies are going to do just fine on this. So, this is why Merck ( $MRK Merck & Co., Inc. ) has been bought up. It’s not a political thing; it’s a money thing. So how are we going to benefit from this? If you’re long the stock you better be long it for an investment not just a quick trade. But if you’re looking to get in I wouldn’t buy the stock yet. I would not buy Merck ( $MRK Merck & Co., Inc. ) here at $41.37. I think you’ll get some kind of a pullback below $40.00 anyway or let’s just say if it pulls back to $40.00; that’s when it would be a good opportunity to start accumulating this position; but remember the weekly chart is really what you want to be looking at in terms of holding time for Merck ( $MRK Merck & Co., Inc. ). This is not a short term trade, this is a multi month trade; I wouldn’t own it just to get four percent. I don’t really care about a stupid four percent yield on a stock; it hardly gets my attention. What does get my attention about the four percent yield is, that I know it gets other people’s attention, it gets big investors, big money managers attention, who want to hold these high dividend stocks. They’re going to look at four percent, they’re going to like that, they’re going to want to be long the stock and also as Merck ( $MRK Merck & Co., Inc. ) falls, if it does continue fall a bit, that yield gets even more juicy. So what this really does, what this yield does is create like an underlying bid for the stock. When the stock comes down there’s always demand underneath. That is why I think Merck ( $MRK Merck & Co., Inc. ) is still a stock you want to buy. I think you just want to buy it on a dip. Okay, members get to the Strategy Session; Tonight’s theme, “What Not To Do Right Now”; I’ll explain when you get over there. Free Chart