MRK Tight Consolidation Break - Long/Short (SAR)As I point out in the chart, MRK is in a very tight consolidation here. With the RSI holding inside of bullish territory after it's recent bounce off the 150EMA it has run into previous resistance. This resistance coincides with a sort of ascending triangle based on the higher-lows it has been making since March '14. This pattern comes to us after a long run up from Nov '13, leading me to have a bias for this play to the upside.
The goal here is to watch it intraday and get long one tick above the most recent bar high ($59.37). Alternatively, we will get short intraday at one tick below the most recent bar low ($58.89) and holding it short expecting a bounce off of the resistance.
The idea is to SAR (Stop & Reverse) the position on a close one tick above/below the same high/low, depending on how we entered.
This means we have $0.77 cents of risk either direction. With a target on the downside around $56.30 and to the upside $64.75 by conservative estimates, that gives us a favorable risk reward. All said and done, the thinking here is that with this tight consolidation at a key level, a big decision will be made here in the coming days, that will make a big play for us. What happens after these candles could be the deciding factor, and we may even see a candle that reinforces one direction over the other to help us in our decision.
