The chemical and pharmaceutical company expects higher organic sales this year by cost savings.

From a fundamental viewpoint, better financials are expected for 2014, increase in sales of near 5% and net margins should rise by 14.3%. The profitability ratio on the company is among the best in comparison to the sector and country. Furthermore, its EPS have been revised upward by Thomson-Reuters analysts (from 5.3 in March 2013 to 6.16 today).

Graphically, the share has fallen in the last three sessions which allows investors to buy the stock at lower prices. The stock lifted 10% on Jan 27th due to its CEO change, hence generating a gap of 13 euros. On March 3rd, another significant drop has been recorded as consequence of lower-than-forecast sales release. In spite of these two events, anticipations on Merck are encouraging as higher sales are expected.
The stock is in contact with the lower line of the rising wedge which arguments for an upward reversal movement. Once this level tested, it should bounce and a gap-filling should take place on further sessions, leading prices to our target at EUR 132.8. Prices behavior would be helped, in daily data, by the orientation of the 20-days moving average and in weekly data by 20 and 50-week moving average.

Considering fundamental and technical analysis, investors could take a long position above the bottom line of the rising wedge (EUR 118). If the threshold is preserved, the target price is at EUR 132.8 for a stop-loss order below the entry point at GBp 111.8.