Step-by-Step Technical Analysis – Merus N.V. (MRUS)

1. Trend Analysis

• Long-term Trend: From late January to late May 2025, MRUS traded sideways between $39 and $48, with only temporary excursions above or below that range. This pattern suggests long-term accumulation with no decisive trend—until 23rd May.
• Short-term Breakout: On May 23, MRUS exploded from the previous day's close of $41.60 to close at $55.14, with an intraday high of $57.45 and a low of $49.00—representing a +32% gap and a new all-time high on enormous volume (7.87M shares vs daily avg 500K-1M prior). Such price action signals a significant technical breakout, typically news-driven (potentially clinical trial or licensing news). This breakout invalidates the prior range and ushers in a new price discovery phase—the prior highs ($48) now become strong support.

2. Volume Analysis

• Volume Profile: The volume on May 23 dwarfed all prior trading days in 2025 and going back months. Average recent volume before May 23 was under 2M, mostly below 1M. The May 23 spike is classic institutional accumulation (or reaction to company-altering news).
• Interpretation: High volume on a breakout day signifies conviction; rarely does price immediately reverse such moves unless the news is later retracted. More often, after a short-term surge, price consolidates before attempting another push higher.

3. Support and Resistance

• New Support Zone: The $48–$50 price from prior resistance and the gap up is now initial support, with the bottom of the May 23 candle ($49) as immediate support.
• Current Price: $55.14—well above all previous resistance, with no overhead supply.
• Next Resistance: Chart shows no previous price action above $57.45 (the day's high). Thus, $57.45 is immediate resistance followed only by round-number psychology at $60, then Fibonacci projections (see below).

4. Chart Patterns & Gap Analysis

• Gap Analysis: The $41.60 → $49.00 gap will serve as a strong support—serious gaps on news are infrequently filled in the short term if volume is this large. However, sharp reversals do sometimes occur post-euphoria, offering risk for late longs.
• Candlestick Patterns: May 23 is a Marubozu bar (long solid body, limited wicks) but with a slight upper wick (open $50.20, close $55.14, high $57.45, low $49.00). The slight upper wick hints at profit-taking, but the strong close above the midpoint is bullish.

5. Moving Average Analysis

• 50-day and 200-day EMA: Both would trail far behind the current price (in the mid-$40s and lower $40s, respectively), confirming a regime change—price is in a fresh uptrend far above moving averages, suggesting a strong bullish regime.
• Exponential Move: Moves above the 200-day by this magnitude and volume have very high predictive value for further momentum, statistically speaking (see studies on high-volume breakouts).

6. RSI and Momentum Indicators

• RSI: Estimated RSI is likely >80, deeply overbought, but overbought conditions can persist for days during rare transformational events.
• MACD: Would show a powerful bullish crossover and negative-to-positive regime shift in histogram, aligning with momentum acceleration.

7. Fibonacci Extensions (Projection Targets)

• Fib Extension from $34.89 low (Apr 8) to $49.16 high (Mar 12), retrace $37.39 (Apr 7):
  • 1.618 extension = $49.16 + 1.618·($49.16–$34.89) = $49.16 + ~22.95 = ~$72.1
  • Immediate 1.0 extension = $49.16 + ($49.16–$34.89) = $49.16 + 14.27 = $63.43
• Shorter-term Fib: Using the immediate pre-breakout high ($44) to $55.14:
  • Fib retracement levels to watch for support if price dips: $50.5 (38.2%), $48 (61.8%).

8. Bollinger Bands & Volatility

• Bollinger Bands: Price is trading 2-3 standard deviations above the 20-day average—a volatility breakout. Though mean reversion is possible, volatility expansion after such volume often continues, with shallow retracements at first.

9. Statistical Backtesting (Event Study Technique)

• Event: >25% gap with 700%+ of average volume: Historically, such signals yield on average another 5–10% upward movement over the next 1–2 trading sessions, followed by some consolidation as price digests news. False breakouts are rare unless there is a material negative news reversal.

10. Market Psychology

• FOMO and Short Squeeze: Traders rush in post-breakout, many shorts are likely squeezed with forced buying above $50—further fueling the rally. Latecomers may push price toward $57.5, slight overshoot is possible before short-term exhaustion sets in.

11. Institutional Order Flow

• Order Imbalance Analysis: This volume surge suggests heavy institutional participation. These players rarely accumulate in one session; more buying is likely on pullbacks (particularly $50–$52 zone).

12. Earnings/News Context (Implied)

• While details are unavailable, given the volume and price surge, this is likely due to a positive drug trial readout, strategic deal, or acquisition rumor, all of which merit a regime change in price.

13. Risk–Reward & Optimal Entry/Exit

• Buying after a 32% breakout is risky; optimal entries are on intraday dips.
• Trend-following play: Expect continuation up to resistance ($57.5) or next Fib target ($60), but a pullback is possible to $52–$54 for entry as post-news volatility cools.
• Sell/short not advised here UNLESS clear reversal develops intraday.

Synthesis & Forecast (Next 24 Hours)

• Scenario 1: Momentum Continuation
  • Early buyers push price above $57.45, chasing news; possible test of $60 (psychological and Fib level).
• Scenario 2: Shallow Pullback/Consolidation
  • Price retraces to $52–$54 (support at breakout, few profit-takers exit, new buyers accumulate, then uptrend resumes to retest high).
• Bearish reversal highly unlikely in first 24 hours given magnitude/volume unless news is reversed.

Actionable Plan

Buy any shallow dip toward $53.80–$54.50 (between mid-candle and new support), target a move to $59.80 (high of day plus Fib projection/psych round number), tight stop under $52 (gap-close risk). Avoid shorting on such massive conviction breakout.