In today's stock spotlight, let's take a closer look at Merck (MRK), which appears to be just one step away from confirming a strong bullish breakout.
The technical setup here is quite promising. The chart shows an inverse head and shoulders pattern, a classic reversal formation, clearly marked with a red rectangle. The price has already broken above the black neckline, officially activating the buy signal. On top of that, Merck has also broken the blue downtrend line, which has been connecting lower highs since mid-2024. This dual breakout — from both neckline and trendline — underlines the shift in sentiment from bearish to bullish.
However, yesterday’s session introduced a bit of caution. After the breakout, we saw a notable reversal candle, which raises some short-term questions. That said, key support levels remain intact. As long as the price stays above the neckline and downtrend line, the bullish outlook holds.
If the price falls back below the black and blue lines, however, that would invalidate the breakout and potentially trigger a fresh sell signal, signaling that the bullish breakout was premature or false.
For now, the focus stays on price action around those support levels. Hold above them, and bulls remain in charge.