Talisman Energy Inc. (USA) (NYSE:TLM) finished yet another almost flat session with a minor gain of 1%. However, the volume remained high at 52 million against a daily average of 10 million only as a lot of merger arbitrage activity was going on. For over 4 months, the stock has been stuck in the range of $7.30-$8.00. The reason for the upper limit of $8 in this period comes from the acquisition offer.
Talisman Energy Inc. (USA) (NYSE:TLM) was offered $8 per share as the acquisition price by Spanish energy producer Repsol, after months of rumors swirling. The announcement immediately drove the shares to $8 level and since then, the price is hanging in the vicinity of that level. In the last few months, the deal has been approved by both Repsol and Talisman shareholders. The legal approval from the Alberta court has been received and now the only permission pending is from the Feds, which shouldn’t pose any difficulty. The entire deal is expected to be finished in the next few weeks.
The volume remains high in the long sideways phase due to merger arbitrage, as mentioned earlier. Whenever the stock comes to say, $7.60 levels, the arbitragers buy the stock because at $8 purchase price, that’s a return of 5.25%. Pretty attractive.
Technically, the stock is in the middle of nowhere. The sideways phase and the price action before that do not provide any strong clue. The triangle breakdown, as shown on the chart attached, suggests that any extension of rally will face strong supply pressure around $10 levels. Now a final and successful closure of the deal may encourage the bulls to make an attempt to break above $10 levels and if they really manage to do that, the long term structure of the stock will begin to change for the better.
