The MRK (Merck & Co.) short setup that was posted yesterday went on to trigger a short entry on a gap below the bearish rising wedge pattern today. While one could have certainly shorted the opening gap or the ensuing rip higher that followed, which was the ideal entry since that brought prices back up to make a perfect backtest of the pattern, MRK is once again offering another objective short entry around current levels as the stock has now reversed off the 61.8% Fibonacci retracement level of the move down from yesterday’s close to today’s low (LOD) of 55.52.

Whether or not to establish or add to a position following a gap or large intraday move depends on many variables but for the most part, I prefer not to chase an initial entry on a position if the stock is too far from the price trigger for the entry on the trade. Assuming that one were to short here around the mid 56 level, consider a stop about a point above entry if targeting T1 and about 1.60 over entry if targeting T2. The updated daily chart is above followed by a 1 minute chart showing today’s price action in MRK so far.

One final note on this trade. I often talk about the use of beta-adjusted position sizing and in doing so, I usually reference the higher-beta, high-risk/high-return trades. Keep in mind that beta-adjusted position sizing works both way. When trading relatively low volatility mega-cap blue-chip stock like MRK, I will often take a position size that is slightly larger than my typical position size as the both the expected risk (loss) if wrong, as well as the expected gains on the trade, are smaller than many of the other trade ideas posted here.

click here to view the live daily chart of MRK