Merckury’s Up – Meltdown Imminent (MRK)

Good Jews and Loyal Noahides – don’t be fooled!

The healthcare/pharmaceutical business is a racket.

It always has been, but lately it’s grown arrogant in the extreme, flaunting its power and flexing its abs as if the gals were all gawking.

Not that we’re jealous of those with a terse trunk – no, no.

We’ve worked on ours aplenty and know the value of firm chassis.

Just can’t stand the pride that so often goes with it.

Anyway, the enemy of the day is Merck & Co., Inc. (NYSE:MRK), Davos acolytes and NWO drug dealers extraordinaire.

This is a company, by the way, that has the gall to employ what they refer to as a “VP Human Health” (as if they gave a willy) and a “VP Ethics” (which presently has us doubled over in stitches).

Please!  Please!  When will the hilarity end!?

Because being a criminal with the backing of the law is absolutely uproarious.

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So…

Merck’s time has come, we say, after a protracted climb.  And we’ve warmed the grill in order to cook you up a charm of a trade with a 2400% profit potential.

And whaddaya know – it costs nearly nothing to set.

So if you like your weekly AJAHM trade, you can go in big on your weekly AJAHM trade.

Now back to Merck –

Here’s a quick take on the company’s fundamentals.

• The shares possess a P/E of 16.97, relatively sane for this market,
• A Dividend Yield of 2.97% (outright good), but
• A Price to Book ratio of 5.75, which requires not a little ‘health care’.
• Debt/Equity is polyp-like, at 0.78 (also not healthy), and
• Consensus earnings for the next full year are expected to DECLINE by 0.15%.

But worst of all, the entire pharma/drug-you-ceutical oeuvre got slap-happy overbought during the Batflu mind-attack, and is now due to come back to earth.

Have a look at the chart –

The technical picture is as follows –

1. First, we had an overbought RSI read in early April, (circled, in red), followed by negative divergence (green arrow).  This is indicative of a loss of bullish momentum.
2. Price had a brief touch of the short-term moving average since then, followed by a bounce to the latest highs.  All told, the move was some 30%, and we’re looking for a decline that brings about another touch of that same short-term MA (in purple).  That’s all we require to cash on full-profit on the trade.
3. As the chart shows, the move also pulled price far from her long-term moving averages (in blue), and that sucking sound you hear from below is exerting an increasing drag daily.  We believe that by week’s end the downdraft will have begun in earnest.
4. It’s still early stages, but it appears the upper edge of a potential rising wedge may also be taking shape (in red, at top).  If that’s the case – and it remains a big IF – the wedge should be closed by summer solstice, the 21^st of June, at the latest.  Those familiar with the work of Arch Crawford (and financial astrology, in general), should take note.

That’s not an endorsement, by the way.  Just so you know: Crawford offered one of the most consistently successful market timing newsletters for decades – and everything was based on the stars!

Our Merck trade happens to arrive while Mercury is retrograde.

Now fancy that…

A Jew and His Money recommends you consider selling the MRK August 19^th 92.50/95.00 CALL spread* for a credit of $1.05 (4.05/3.00), and buying the MRK August 19^th 92.50/90.00 PUT spread** for $1.15 (4.00/2.85).  Total debit is $0.10.

[*Sell the 92.50 CALL and buy the 95 CALL.  **Buy the 95 PUT and sell the 92.50 PUT.]

Rationale: Our breakeven on the trade arrives at $92.40, just 68 cents (7/10^ths of one percent) below the stock’s current price.

Full profits are garnered on a decline of just 3.3%.

Should the trade pan out, we’ll pocket 2400%.

$2.40 NET on a dime spent.

Max loss on the affair is $2.60.

May the G-d of Heaven and Earth – the Holy One, Blessed Be He – be with us.

With kind regards,

Hugh L. O’Haynew

Follow @HughLOHaynew