Hi Traders,

Let's go with the puts in Merck (MRK) this week.

The stock topped out on Aug. 25 at $156.92, an all-time high, and printed a harami candle the very next day.

A harami is an inside day (the whole session's range fits inside the prior day's big candle) that shows up right after a strong move. It signals a possible change in trend, and in this case it looks like the end of the uptrend.

MRK now trades below its 20-day moving average and is working on closing the gap it opened on Aug. 19th:

That gap came from the Moderna cancer vaccine news. MRK jumped almost 13 percent in one session, its biggest single-day gain since March 2009, and it never came back to fill the hole it left behind. Closing the gap takes it down to $137.98. Use a close back above $146 as your stop loss.

Here's the tell for me. On Wednesday HSBC raised its price target to $172, and the stock dropped 1.9 percent anyway. When a $22 target hike can't lift a stock, the buyers are tired.

Merck is the big pharma name behind Keytruda, the cancer drug that brought in $31.7 billion last year, almost half the company's $65 billion in sales. That's the whole story with this stock. Keytruda loses U.S. patent protection in 2028, and Wall Street has spent the past year bidding MRK up about 80 percent on the hope that the pipeline can replace it: the Moderna vaccine, Winrevair for lung hypertension, a growing vaccine franchise, plus an animal health business that sells Bravecto for your dog. That's a lot of hope priced into a stock that's already given back $12 from its high.

My favorite stock for calls this week is Space Exploration Technologies (SPCX). Look at how perfectly the stock follows my pitchfork channel (a set of parallel trendlines that maps where a stock keeps finding buyers and sellers), honoring both support and resistance:

This little pullback brought the stock back to the bottom of the channel, with the 20-day moving average sitting just below as a second layer of support.

What I like about the pullback is what caused it. Another batch of lockup shares, about 59 million of them, became eligible to sell on Wednesday. The stock dipped to $145, got bought right back up, and finished the week higher. It absorbed a 911 million share unlock in early August the same way.

The stock should keep trading up this channel, which takes it to $155.36 and then $171.57 above there. Use a close below $146 as your stop loss.

SpaceX is a rocket company, an internet company, and an AI company sharing one balance sheet. It reports three segments. Space builds and launches Falcon 9, Falcon Heavy, Starship, and Dragon for NASA, the Space Force, and commercial customers.

Connectivity is Starlink, the satellite broadband service that hit 12 million subscribers last quarter, double a year ago, and it's the only segment turning an operating profit. AI holds Grok, the X platform, and the data centers, and it grew revenue 247 percent last quarter on new cloud contracts.

The whole thing runs on vertical integration: SpaceX builds the rockets that launch its own satellites that feed its own network. Second-quarter revenue came in at $7.8 billion, up 92 percent, and the CFO says Starship's next flight later this month will be the first to bring in revenue.

Does either of these make the base trade on Monday's Ticker Highlight Show Premium? Join the show at 10:30 AM ET to find out. [LINK]

Trade Accordingly,

Licia Leslie