DailyPlay – Merck & Co Inc (MRK) – January 31st, 2022

Bullish – MRK – $80.90

Catch OptionsPlay’s Chief Strategist, Tony Zhang on CNBC, Options Action every Friday at 5:30 PM EST!

MRK Bullish Trade Idea:
Our bullish trade idea for today is Merck & Co Inc (MRK). In recent months, MRK has formed a double bottom near the $72.50 area and has rebounded with strong momentum. Price has now broken above the $78.50 resistance level and both 1M and 6M trends are now bullish. With an earnings announcement scheduled for Feb 3rd, MRK’s strong relative strength against the market and sector heading into this announcement is an encouraging sign for a continuation of its rally.  

Please note that this is an earnings play and high volatility is expected after the earnings announcement. View MRK Trade

Market Outlook:

A strong performance on Friday saw SPY hold the key $428 support level and gain 2.48% to end the day on a positive note and provide some optimism that the worst is over. QQQ managed to recover just over 3% and is now retesting a previous support level at $350 – a break above this level would indicate further upside, however, bearish price action at current levels would indicate that a move lower is on the cards. Despite the strong bounce higher in yields over the last few weeks, the US 10 year is yet to break above the 1.91% level and is showing signs of slowing momentum. 

Sector Rotation:

The Relative Rotation Graph (RRG) for sector rotation indicates that there are 8 sectors in the Improving and Leading categories, and 3 sectors in the Weakening and Lagging categories

Leading (positive relative trend and positive relative momentum): Defensive sectors along with Energy continue to provide overall leadership. Weakening momentum in Materials.

Improving (negative relative trend and positive relative momentum): Healthcare, Financials, and Industrials showing good momentum. Will likely rotate into the Leading category should this continue. 

Weakening (positive relative strength and negative relative momentum): Discretionary and Technology have rotated into the Weakening category and are still experiencing weak momentum. 

Lagging (negative relative trend and negative relative momentum): Communications is experiencing a pickup in momentum and remains the only sector in this category. 

Tony Zhang