Pfizer Inc. (PFE) shares fell 0.40% to $34.84 after announcing they have acquired Medivation Inc for approximately $14 billion in cash. The move propels Pfizer into a leading position in oncology.
The definitive merger agreement under which Pfizer will acquire Medivation, a biopharmaceutical company focused on developing and commercializing small molecules for oncology, was for $81.50 a share in cash. The Boards of Directors of both companies have unanimously approved the merger, which is expected to be immediately accretive to Pfizer’s Adjusted Diluted EPS upon closing, approximately $0.05 accretive in the first full year after close with additional accretion and growth anticipated thereafter. Pfizer does not expect the transaction to impact its current 2016 financial guidance.
Price action on the PFE daily chart shows that price is finding tentative support from the 100-day SMA, which currently trades at $34.47 level. It is around that area that price could form a bullish Gartley pattern. Point D is targeted with both the 78.6% Fibonacci retracement of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move. If we see this level break, price may target 200-day SMA, which currently trades at $32.80.
To the upside, $35.56 remains key resistance, a weekly close above this level could open the door to test fresh 2016 highs.
The Trade: Sell PFE at $34.25, with a stop loss at $34.71 and a take profit at $32.85. The Risk/Reward Ratio is 1:3