The stock of the German pharmaceutical group, Merck, could soon break out a resistance area to reach its recent highs.

The company benefits from recent upward revision in earnings per share for this year and 2014. Thus, the net profit may double in 2013 to reach a net margin of 10.4% compared to 5.3% last year. Further, the firm is financially healthy with a low financial leverage (net debt/EBITDA) of 0.65x in 2012.

Technically, the trend is bullish in the medium and long term with well-oriented weekly moving averages. After a slight decrease, prices sharply bounced on the EUR 115 support. A breakout of the EUR 120.7 resistance and the 50-day moving average, may occur in the coming trading session, and would confirm the rebound and allow the security to come back to its recent highs, around EUR 125.4.

As a consequence, it seems opportune to monitor the breakout of the EUR 120.7 short term resistance to take a long position in Merck. The first objective will be EUR 125.4 then EUR 130 by extension. A stop loss must be placed just below EUR 119.