Merck & Co. Inc. (NYSE: MRK) opened at $51.58 Thursday. So far today the stock has hit a low of $50.25 and a high of $52.26. As of 11:55 a.m., MRK is trading at 51.90, down 0.46 (-0.9%).

After hitting a one-year high of 55.14 in May, the stock has been trading within a $5 range over the past three months. The company and its private partner Neuromed announced yesterday evening that they have abandoned development of chronic pain drug MK-6721 because the drug candidate "did not demonstrate characteristics necessary to advance the compound further in development." Technical indicators for MRK are bearish with minor improvement, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $55 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make a 19.0% return in just 6 weeks as long as MRK is below $55 at September expiration. MRK would have to rise by 6% before we would start to lose money. Learn more about trades like this one here.

MRK has never been above $55 for more than a day in the last twelve months, and the stock has shown some resistance around $53 recently. This trade could be risky if the stock breaks through the $55 level where it topped out in June, but the series of lower highs since then suggests a slightly bearish trend.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MRK.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Gilead Sciences, Inc. (NASDAQ: GILD) is a favorite speculative idea for 2007 from Bill Martin, editor of FindProfit. The advisor explains, "Gilead is best known as a biopharmaceutical company with a leading HIV treatment franchise (Viread, Truvada, and Emtriva).

"Gilead is also a player in the fungal infection area, with treatments for chronic hepatitis B and influenza. Gilead's Tamiflu product is licensed to Roche, which produces and markets the product. The company has had a wonderful growth run in recent years, and now commands a $30 billion market cap.

"Trading just above 25 times 2007 earnings estimates, the stock is obviously not a bargain on the surface, but we believe that the stock remains a compelling investment opportunity, with several key drivers in hand.

"Foremost, Gilead's HIV franchise is truly best-in-class, and recent advances (including unique 'one-pill-a-day' regimes) and international expansion should power the company to double-digit growth in the coming years. Also two recent acquisitions (Myogen for $2.5 billion and Corus for $330 million) have materially improved GILD's pipeline, which was previously looking somewhat barren in the medium term.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Elan Pharmaceuticals (NYSE: ELN) is the top speculative stock for 2007 from Ken Kam. The editor of Marketocracy's Marketscope, explains, "Last year, I also chose Elan as my top pick because I thought their multiple sclerosis drug, Tysabri, would be approved for sale again.

"It was, but it didn't happen until July. Further, the FDA then required additional testing. This slowed down the sales that I had expected and led to disappointing sales in the third quarter. However, I think this delay was a speed bump, not a brick wall. Thus, the growth I thought would occur in 2006 I now think we'll see in 2007.

"Over the next 12 months, I think Elan's price will move up as Tysabri sales accelerate in the U.S. and Europe. In addition, Elan just filed today for approval to use Tysabri to treat patients with Crohn's disease -- a patient population that may ultimately double Tysabri's sales potential.