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Despite the Federal Reserve opting for a pause at its September meeting, keeping the Federal Funds Rate steady at 5.50%, the central bank left the door ajar, hinting that an additional rate increase may be forthcoming as inflationary pressures run the risk of reigniting. Not only that, the central bank also signalled that only 50 basis points of monetary easing shall be expected in 2024, as they have upwardly revised their rate projections to 5.1%, as their inflation projections foresee entrenchment.

Thus, the Fed’s hawkish pause kept equity traders’ optimism on a leash, nudging them to downsize their bullish bets for the foreseeable future and as a result, all three major US stock market indices moved south as traders took note of the “higher for longer” narrative. In this equities report we aim to present the latest news regarding the pharmaceutical and drug manufacturing giant, Merck and conclude with an equities technical analysis.

Equities: Merck covid pill liked with virus mutations

Merck and Co., the pharmaceutical giant hailing from Germany, listed in NYSE under the ticker #MRK, currently trades around the $106 range in today’s pre-market session, close to the trough that was formed in August and is down by almost 5% since the start of the year. Yesterday, news reports hit the market that the drug maker’s antiviral pill Lagevrio, can allegedly cause mutations in the SARS-CoV-2 virus which hold the potential to accelerate the virus evolution and spread to other patients.

The equities report, is expected to cause backlash in the pharmaceutical industry circles and cast doubts on the usefulness, the efficacy and the potency of the drug molnupiravir, which has been, if not the first, one of the first treatment drugs at the start of the pandemic. Molnupiravir works by causing mutations in Covid’s genetic information, which weakens or destroys the virus and reduces the amount of Covid in the body according to NIH.

However, the study published Monday, in the top-tier scientific journal Nature, found that “Covid can sometimes survive treatment with molnupiravir, leading to mutated versions of the virus that have been found to spread to other patients.” Financial Times reported that “Researchers analysed a family tree of 15mn sequences of coronavirus to see which mutations had occurred and when, with the results showing they increased in 2022 after molnupiravir” linking in a sense that usage of the Lagevrio, with higher chances of virus mutations.

One Merck spokesperson was quick on the offensive and dismissed the study by stating that, researchers assumed that the mutations analysed were associated with the molnupiravir-treated patients “without documented evidence of that transmission”. Nevertheless, should enough coverage get underway about the finding of this study we could expect to see Merck’s share price facing hurdles and contracting below the $100 range and roam into territory once seen before in November of 2022.

Technical Analysis

#MRK Daily Chart

A diagram illustrating the dynamics and trends in equities markets.

Looking at the Merck Daily chart we observe that the stock trends in a descending channel incepted since the start of May and its share price in today’s premarket session floats around the $106 range. We hold a bearish outlook bias for Merck, given that the RSI indicator below our daily chart registers a value of 40, signalling that the sentiment in is favour of the bears.

Adding support to our bearish case is the crossover of the MACD line below the signal line below our daily chart, alongside the slow buildup values of the histogram, indicating bearish momentum. Should the bears continue to drive the stock’s price to lower ground, we may see the break below the $102.50 (S1) support base and the fall towards the $98.00 (S2) support base, a level once seen before in the early stages of November of 2022.

Should on the other hand, the bulls take over, we may see the break above the upper bound of the descending channel and the breakout from the $111.10 (R1) resistance barrier. Should on an extreme case the bulls dominate over the direction of the stock, we may see its price rising closer to the $115.38 (R2) resistance barrier.

Disclaimer: This material is for general informational & educational purposes only and should not be considered investment advice or an investment recommendation. T4Trade is not responsible for any data provided by third parties referenced or hyperlinked, in this communication.

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