Chart of the Day: Metro Bank (MTRO)

Somehow,  farcical bank Metro managed to raise its last chance saloon cash last week, and the market has breathed a sigh of relief. The scenario here is that having been trodden on by the current banking cartel, brought to its knees, and then thrown a lifeline, the challenger bank should be easy prey for a buyer.  Given how poorly it has performed, this would probably be best for all.

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As far as the chart is concerned, we see a classic falling wedge break at January’s resistance line of 600p. Above this and the top of the February gap at 1,300p is an obvious target. Traders close to the market would use the 50 day moving average at 763p as their stop loss.

Astrazeneca (AZN): Back In the M&A Frame Five Years On

Those who follow the markets and have done so for an extended period of time – say over 30 years, tend to know when deals should get over the line, and when they should not.

In the case of AstraZeneca with Pfizer in 2014, it was as clear then, as it is now that AstraZeneca should have allowed itself to be taken over by its US rival. Instead, CEO Pascal Soriot scrambled to keep his company independent and his job, having only been in the hot seat a couple of years at that point.

Winding forward to 2019 and apparently, Soriot has been vindicated, with puff pieces last month “Just The Tonic” in Sky News et al. However, it is rare that a UK company gets the scale to be a genuine multinational player on its own. In addition, the share price of the group has been disappointing, so that those who backed Soriot five years ago have been effectively sitting on dead money.

The good news though, is that Astra has a significant drugs pipeline unlike many of its larger peers. Now it is said to be being targeted by potential EU and US rivals. This is especially so given the way that the pipeline problem is much worse than it was five years ago, and regulatory issues, as well as generic competition, have also come through.

According to City sources, Astrazeneca’s advisers are now on alert to defend against an offer, one that could be north of £75 – the top end of current broker targets. Indeed, they have gone so far as to suggest that due to the lack of pipeline in the sector,  Astra could go into an auction situation. The problem is that Soriot did develop the Astra business, but was never able to extract shareholder value. This omission has now come to a head.

Mylan: Private Equity And / Or Consolidation

The recent history of generic drugmakers has not been a happy one. Regulatory pressure and competition in the space have been a double whammy that many have not been able to withstand. In the case of Mylan, the revenue dive and $14bn of debt mean that tinkering around the edges  – the latest Aspen drug buy,  is certainly not enough. However, all may not be lost even after the recent share price collapse, with it likely that activist Elliott will do its normal thing and be an activist investor to sort the situation out. Indeed, while generic drugmakers may be out of favour on the stock market, they are the kind of situation which should be cat nip to the private equity brigade. This is particularly said on the basis that so much generic drug real estate around, and so many struggling, the time is ripe for consolidation in the sector. Such conditions suit private equity investors just fine.

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As far as the price action situation of Mylan, it can be seen on the daily chart that the stock is effectively trading at a multi-year line of support at $19, and have the Relative Strength Index, at record lows. This should mean that even if the companies problems are not ironed out straight away, we should still see a near term bounce to the low $20s. If others, as well as Elliott (perhaps a seasoned strategic investor) enter the picture for the purposes of rescue and recovery, we could see more gains even than this: back to $30 plus where the stock was as recently as February.

Chart of the Day: EDP-Energias de Portugal

It has been the case all too often in recent history that shareholders/management voting to reject bids has been a bad idea. However, at least in the case of EDP, the market cap is above the €10bn offer from China Three Gorges.

Nevertheless, with Elliott muscling into the situation as an activist investor, it may be expected that EDP will have to start making moves soon to justify being independent, and to extract the kind of shareholder value that may exist here if the current near €12bn price tag is to be justified.

Elliott’s proposal to raise €7.6bn from the sale of non-core assets would go a long way to do this, and the expectation must be that the process could be announced sooner rather than later.

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Looking at the price action of EDP, the stock has been in a relatively erratic €2.90 – €3.60 range over the past year. But with the recent sub €3.10 bear trap, one would look to the next break of €3.30 leading to a more sustained move to the upside, and perhaps even a break to the upside.

Norwegian Air Shuttle (NAS:NO): Takeover Talks End Abruptly

Last Thursday, May 16, Spanish financial newspaper, Expansión, reported that ailing Scandinavian airline Norwegian Air Shuttle could be the subject of takeover interest. This caused the stock to rise by around a third, as investors marched into the situation. However, it could very well be the case that they are forced to march out rather quickly.

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According to sources familiar with the situation,  on Friday talks with the Scandinavian company ended abruptly.  A would-be bidder described as the “enfant terrible” of the stock market, and a large trader as defined by the SEC, walked out of negotiations.

Clearly, despite being in a delicate financial situation, exacerbated by the Boeing 737 MAX debacle, Norwegian has apparently failed to secure its position on this occasion,  presumably due to an overly optimistic view of its valuation. The stock recently fell to multi-year lows. Without the oxygen of takeover talks, the risk is that it will again.

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Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Chart of the Day: 3M (MMM)

On Friday Barron’s covered US conglomerate 3M with the headline “3M Crashed After Earnings, but One Director Just Bought Shares.” Normally, a director buying after a disaster is actually a way of attempting to rouse sentiment towards a stock.

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This is especially the case given the way that according to stock market rules, if there was anything truly positive in the offing the director should not be buying. However, the stock has so far bounced off a line of support from May last year, and therefore there could be a method in the madness. In addition, even Seeking Alpha, the too clever for its own good publication, has yesterday added “Be Greedy When Others Are Fearful” article on the subject yesterday.

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Overall, this could be one which is indeed, a long haul recovery, or perhaps others will see value in this long bombed out situation. A journey back to the middle of its recent trading range at $190 is possible.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Zayo (ZAYO): Cork In Water Rebound

The possibility of M&A developments for Zayo was discussed here a couple of months ago, and we have seen the stock price rise from around $25 to where it is now. Yesterday looked initially as though the recent rally could be at an end. However, there was a sharp intraday rebound, suggesting that buyers are still keen on this situation.

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Indeed, the rebound off the 50 day moving average echoed the sharp gap higher seen at the beginning of last month, and one would presume that this suggests that any M&A moves could now be imminent. This is especially so while the stock remains above the 50 day moving average at $30.01.

Disclaimer
Zakmir.com is a purely journalistic not for profit website (unlike the mainstream media). Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Chart of the Day: Lookers (LOOK) Holding Support

Car dealer Lookers appears to be in the safe pair of hands category on the fundamental front, something which has not been reflected as far as the share price performance of late.

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The acid test is likely to be whether the main support zone for the stock around 90p is held over the next few weeks. Certainly, last month’s solid update and the dividend hike should mean that last year’s uptrend line at 90p is held. At the very least one would expect a return to the top of the one year trading range at 110p over the next 2-3 months.

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Disclaimer
Zakmir.com is a purely not for profit journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Thomas Cooking It

There are three main types of M&A situations. The first is when a bidder needs to make a deal to make up for underperformance or in an attempt to achieve further outpeformance. The second is when the target has underperformed and becomes cheap. The third is when the target is in the last chance saloon and the company itself would like to be taken over to put itself out of its misery. It may be uncharitable to suggest that Thomas Cook is in the third category, but it is not that far off either.

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Sky News coming up with the bid story is clearly just in the nick of time for Thomas Cook shares which have been near year lows. But as has been pointed out, if the story was imminent the company itself would have been forced to release a RNS. Nevertheless, holding the chart gap to the upside yesterday through the 50 day moving average now at 28p was a sign that the stock could rally at least in the same way that it did in December towards 40p.

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It is also interesting that there was bullish divergence in the RSI window aheadd of the Sky News revelation, indicating that a few speculators may have had a whiff of the good news. The key now is that 28p and the 50 day line is held for more than a few days. That said, given the gap up this month and the gap down in November we have a bullish Island Reversal, as well as a bullish Falling Wedge breakout, both of which suggest a move to 40p – with or without an officially announced deal. The key will be whether there is buying volume today, or just buy the rumour / sell the bid story to back the double charting buy signal?

 

Disclaimer
Zakmir.com is a purely journalistic, not for profit website. Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

US Charting Stocks: $NSTG $SAIL $UNM

Nanostring Technologies:

As we celebrate record intraday highs for the US stock market, it is interesting to look at a trio of US stocks that have so far made somewhat hard work of the greatest bull market in history.  In the case of the Nanostring chart there are three things to focus on. The first is the strange “pile driver” day in March where the stock fell and then immediately bounced back.

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This is a sign that somewhere behind the scenes there is a very keen buyer. Indeed, the latest price action in the form of a rebound off the floor of a rising trend channel from September and the recovery of the 50 day moving average at $24.94 implies that the rally here is back on track and could hit the top of the rising trend channel at $35 over the next couple of months. The stop loss is the aforementioned March day support at $22,00. It would be very surprising if this was broken.

Sailpoint Technologies: 

For Sailpoint it would appear that the recent pullback is also at an end, and that there could be an extended rebound off the $27 February 2018 uptrend line.

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Indeed, an end of day close back above the 200 day moving average at $27.78 may be decent confirmation of a return to bullish form, with a clearance of the 50 day moving average at $29.19 the trigger for cautious traders. Ideally, we have been in a converging triangle and this will break to the upside via $31 before the end of next month.

Unum Group: 

With Unum we get the feel of an oil tanker trying to turn around to the bull side, but with two failures over the past couple of months to clear the 200 day moving average at $35.70. The hope now would be that it is third time lucky, especially given the M&A buzz doing the rounds regarding the company last week.

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Nevertheless, unless there is a dramatic fundamental development the easiest way forward here may be to wait on a break of the main $38 resistance, or even a higher low above this mark. That said, where is the fun in being that cautious?

Disclaimer

Zakmir.com is a purely journalistic, not for profit website. Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.