Alcatel Lucent SA (ADR) (NYSE:ALU) crashed to end the last trading session with a loss of 18.46% on the back of a news of the company merging with Nokia Corporation (ADR) (NYSE:NOK). The previous three sessions saw the stock rising over 27% but yesterday in a single session, it lost most of it. The volume spiked very sharply to 83 million against the daily average of 16 million only.
The rumor of the merger has been floating in the market for a few months but the confirmation of the news now is not being taken by the market too kindly as the details are coming to the fore. An offer for all the outstanding shares issued by Alcatel Lucent SA (ADR) (NYSE:ALU) will be made by Nokia Corporation (ADR) (NYSE:NOK) through a public exchange offer in the US and France. For every ALU share they own, the shareholders will receive 0.55 of a new NOK share and this puts the value of ALU at 15.6 billion Euros or roughly $16.65 billion. The CEO of ALU, Michel Combes, will leave the company but will remain as a shareholder. The companies face a tough job now as they have to persuade the trade unions, regulators and investors that this deal will strengthen the company and not make it a dominant network provider as feared in some camps.
Technically, the drop yesterday came at the conclusion of a clear 3 part rally. The first phase of the rally saw the price reach $3.60 levels from $2.40 levels, which was followed by a sideways corrective phase ending with a short term bottom around $3.10. The last part of the rally maintained a perfect external projection of the first part.
Now the bearish Island reversal pattern suggests that even though a short term bounce can’t be ruled out, eventually a further decline towards $3.20 looks more likely.
