Hurry Up and Wait

 | Jul 19, 2013 | 9:30 AM EDT
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I'm stalking a possible secondary entry to a trade setup that I have identified in Merck (MRK). Let's start by taking a look at the original setup. There was what I call a Fibonacci price cluster at the $45.50-$45.97 area. This original zone included the coincidence of at least six Fibonacci price relationships. One of the most important price relationships within this cluster zone was the 100% projection of the prior decline into the May 1 low, which was at $4.19. The second decline into the July 2 low was $4.13 -- which was very similar! When comparing swings in the same direction, this is what I call "symmetry."

We have already seen a nice rally off the original support cluster, and if this last low is more important, then buying a pullback to this last low should be a good strategy. With that being said, however, I only want to buy this pullback if the new support holds and I also see a purchase trigger fire off. I do see that there was a downgrade of this stock. Sometimes, however, these provide opportunities.

The new pullback zone comes in anywhere from the $46.64-$47.44 area, though I would prefer if it held the $47.12-$44 area. If this stock can stabilize in the next couple days above this zone, I will be watching for a trigger to suggest that it is worth placing a bet against this pullback zone. If we do start to see this unfold, I'm going to watch for the original upside target from the July 2 low, which comes in at $51.28.

One trigger I like to use is an 8/34 EMA moving average crossover to the upside for a buy, along with taking out a prior swing high on a 15-minute chart. If this occurs, I will enter the buy side with my risk defined below the low made prior to the buy trigger.

If I don't see any reversal indications; however, I will stand aside and wait for the next setup instead.

Merck (MRK) -- Daily
Source: DynamicTrader

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volatility is quite low here, and we could see some downsides here in the short term. ...



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