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Trading Strategies For Pharma Giants Merck And Pfizer

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Ideas from Forbes Investor Team Opinions expressed by Forbes Contributors are their own.

Richard Henry SuttmeierRichard Henry Suttmeier , Contributor

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Merck, a pharmaceutical giant and component of the Dow Jones Industrial Average reported quarterly earnings before the open on Friday and gapped lower on Friday, and again today. From its close of $61.99 on Thursday to its open on Monday of $55.75 the stock crashed by 10%, which set this stock to the “earnings woodshed.’

Pfizer reports its quarterly earnings before the opening bell on Tuesday, and this pharmaceutical giant, which is also a component of the Dow, is down slightly since setting its postelection high of $36.78 on Oct. 23. This stock is a member of the “Dogs of the Dow” for 2017.

Merck’s woes stretch beyond U.S. boarders, as the company withdrew an application seeking approval for further action on a lung cancer drug in Europe. Merck has an elevated P/E ratio of 33.51 and a dividend yield of 3.30%. Merck was one of the “Dogs of the Dow” for 2016, not in 2017, but it may qualify again in 2018.

Analysts expect Pfizer to earn 64 cents a share when they report. Pfizer has a more reasonable P/E ratio of 26.09. Its dividend yield of 3.76% would keep the stock as a “Dog of the Dow” in 2018.

Merck (MRK) opened Monday at $55.75 down 5.3% year-to-date and set its postelection low of $54.41. The stock is in correction territory, 16.5% below its postelection high of $66.80 set on March 1.

Courtesy of MetaStock Xenith

Courtesy of MetaStock Xenith

The weekly chart for Merck is negative with the stock below its five-week modified moving average at $61.39. The stock ended last week below its 200-week simple moving average at $58.52, putting the stock below its “reversion to the mean.” The 12x3x3 weekly slow stochastic reading is projected to decline to 40.30 this week, down from 49.50 on Oct. 27.

Must Read: 5 Standout Monthly Dividend Stocks To Buy

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