Allstate Corp. (ALL) agreed to acquire National General Holdings (NGHC) for nearly $4 billion in cash as the U.S. insurance giant looks to "increase market share in personal property-liability." The deal, which includes a breakup fee of $132.50 million, will be "accretive to adjusted net income earnings per share and return on equity beginning in the first year," said Allstate CEO Tom Wilson.
I have no idea if this deal makes sense so I am going to look at the charts and indicators to see what traders think of it.
In this daily bar chart of ALL, below, we can see that prices have made a small downside price gap this morning. Prices struggled in April and June at the intersection of the declining 200-day moving average line. ALL found some support around $90 in May but that zone appears to have given way today.
The slope of the 50-day moving average line is negative and the On-Balance-Volume (OBV) line has been pointed down since February.
The Moving Average Convergence Divergence (MACD) oscillator is back below the zero line for an outright sell signal.
In this weekly bar chart of ALL, below, we can see that prices have failed at the underside of the declining 40-week moving average line.
The weekly OBV line has been drifting lower this year telling us that sellers are more aggressive. The MACD oscillator remains in a bearish alignment.
In this daily Point and Figure chart of ALL, below, we can see a potential downside price target of $86 but that does not mean that prices will find support there.
Bottom line strategy: I will leave to others to decide if this acquisition is a good deal but for me the charts are on the defensive. Avoid the long side for now.