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Two Ways To Play: Merck Cured of Negative Outlook


Strengthen your portfolio in good times and bad.

According to Bloomberg, Moody's Investors' Service raised the outlook for Merck's (MRK) debt because it viewed the drug maker's decision to begin making payments on legal settlements as a positive.

Merck said last week that it will start mailing payments on some $4.85 billion in settlements to former users of the painkiller Vioxx. The actions prompted Moody's to affirm Merck's existing Aa3 long-term debt and Prime-1 short-term debt ratings as well as lift its outlook for the company from negative to developing. Moody's said the company's conservative fiscal policies countered "pressures" facing sales of Vytorin and Zetia cholesterol pills. The ratings agency says about $5.1 billion of debt securities are affected by the ratings.

From the Bull Pen
: We mentioned earlier this morning a few plays in the biotech sector. Bulls can also consider Celgene (CELG) with supports near $70 and $65 as points to consider.

From the Bear Cave: The positive statements from Moody's may provide some relief to Merck bulls, but bears recognize that the long-term trend line is down for the stock. A downside play might exist if and when the stock reaches the $40 mark.
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No positions in stocks mentioned.

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