Stock Pick - Merck & Co. Inc. (MRK)
Sinisa Persic, CMT | Jan 27, 2015 01:07AM ET
Merck & Co. Inc. has been consolidating in a bullish flag pattern in the last two weeks after a move of about $6 from the 57 range to around 63 earlier this month. A breakout of the resistance at 63.4 could initiate new momentum and accelerate prices toward 65 area in the short term. Initial stop is set below flag low at 61.4.
Basic Trading Rules:
1. Follow the trend.
2. Never hold more than 20% of your portfolio in a single stock.
3. Always know what will be your max loss per trade (if a position is closed at initial stop loss). Use the following protection formula: Number of shares = Max loss per trade / (Entry - Stop loss).
4. Split every position in a single stock into 2-3 parts and use different exit strategies for every part. For example, if there are three parts you will sell 1/3 of a position at first target, 1/3 of a position at second target, and for the last 1/3 of a position use trailing stop strategy which allows you to let profits run and at the same time lock your profits.
5. Once (if) price reaches first target, adjust stop to break even.
6. Never hold position during earnings announcements.
7. Protect your positions in a stocks with higher risk such as small-cap pharmaceutical and drug stocks with options.
8. Avoid trading during the first 10-15 minutes of the market open.
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