Friday, 24 August 2007

Mal de MER

Ah the company with the bull as its mascot and symbol, how the tides have turned.

Merrill Lynch (NYSE:MER) has been on a steady rise since end-2002. It went sideways in a symmetrical triangle that spanned Jan. 2004 to Sept. 2005. It broke out and reached the target of the triangle in a few months. After continuing its rise, we see it consolidated for around 5 months in 2006, before it still continued its rise. It again went sideways and formed a double top that has quite a good return. So do we turn bearish on MER and call a short? Yes and no.

Yes this is a bearish reversal pattern and once it breaks the neckline at 76.87, we see a probably downside target of 55.61. But wait a minute! Did we forget to look at something else? I think we did. What about the long term support that was made since the end of 2002? The support is still intact and is currently situated at roughly the same price as the downside target of the double top.

So what is happening to MER currently? It is still hovering somewhere near the neckline and has yet to fall to its recent lows. The other thing to consider for traders who are interested in this stock, this is NOT for the faint of heart. Even if MER is priced above $70, this is one very volatile issue.

Either the patient trader will wait this out until it drops to the downside target, or they will get whatever profits they can from here and choose a less cardiac issue.

The prudent trader would choose the latter...and that is not me. Why else do you think I am called the TaranTrader?

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