Bullish Moving Average Cross For Merck

Published April 20, 2017
12:01 AM

On April 19, 2017, Merck & Co (MRK) crossed above its 150 daily moving average (DMA). Historically this has occurred 227 times and the stock does not always move up. It has a median gain of 4.139% and maximum gain of 18.194% over the next 16 trading days.

MERCK & CO, INC Chart From

When we take a look at other technical indicators, the relative strength index (RSI) is at 40.4843. RSI tends to determine trends, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. The current reading declares the stock is relatively neutral.

The true strength index (TSI) is currently -18.4921. The TSI determines overbought/oversold levels and/or current trend. I solely use this as an indicator of trend as overbought and oversold levels vary. The TSI is double smoothed in its calculation and is a great indicator of upward and downward movement. The current reading declares the stock is moving down, but the decline is slowing making a potential reversal to the upside possible.

The positive vortex indicator (VI) is at 0.7725 while the negative is at 1.1322. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The current reading declares the stock is moving down.

The stochastic oscillator K value is 24.0888 and D value is 25.7547. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the price action is trending up. When the D value is higher that the K value, price action is trending down. The current reading declares the stock is on the verge is moving up and away from oversold territory.

Considering the moving average crossover, RSI, TSI, VI and stochastic levels, the overall direction appears to continue heading up. Based on historical movement compared to current levels and the current position in its macro trend channel, the stock could gain at least 2.12% over the next 16 trading days.

On April 18, the stock crossed below the 150 DMA. In the last 10 years when the stock is above the 150 DMA, crosses under for one day before re-crossing above, the stock has always gone up over the next 16 trading days. These occurrences were in July 2009, April 2010, November 2011 (3 times), June 2012, March 2013, February 2015, and January 2017. The stock gained 15.911%, 0.971%, 5.072%, 5.531%, 2.517%, 9.091%, 7.659%, 1.134%, and 5.080% respectively. The median gain was 5.080% during this period.

DISCLOSURE: I currently do not have positions in the stock mentioned above. I most likely will not enter a position within the next 72 hours. Historical movements and technical indicators should never be the sole basis for entering positions involving risk. Make sure appropriate research is conducted prior to taking any risk in a marketplace.

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