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Merger Monday

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The Markets have opened lower, but the selling has been mild. Perhaps sellers haven't gotten their coffee yet. As expected, the Semiconductor Index is getting hit the hardest, down 1.79 percent, and is closely followed by software, computers, and disk drives. Biotechs and banks had been in positive territory, but have since turned negative. That leaves healthcare, oil, transprots, and airlines as the only positive sectors.

Airline Index Daily Chart

After failing to complete a double bottom pattern, this sector has been consolidating between 140 and 145. The stochastic is overbought, so a test of the small up trend, and support at 140 could be coming. What is holding the sector up today is US Airways (NYSE:U).

US Airways Daily Chart

Shares of US Airways, have been steadily declining since March, and the failed merger with United didn't help. Just when it looked like the stock was going to lose support at $16, Global Airlines has come in and offered to buy the struggling airline for $1.8 billion. Initially traders took the news poorly, and pushed the stock down to zero, but the stock has rebounded nicely, and is now up 93 cents. Okay, maybe it was just a bad tick, but the stock has once again failed to crack a 5-month downtrend. The 50-day moving average is hovering just above the downtrend, and is ready to thump the stock if the downtrend fails.

Jeffrey Canavan
Assistant Analyst

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