Caesars Entertainment Corp. (CZR) is the stock of the day at Real Money. It was trading around $11.40 in pre-market activity and a deal is on the table from U.S. casino operator Eldorado Resorts (ERI) to merge with CZR in a cash and stock deal that values its peer at $12.75 per share.
Unless there is a white knight in the wings or the deal price is bumped up we should CZR trade to around 95% of the deal price and slowly inch up to the price as things get closer to the settlement date. Let's look at two charts.
In this daily bar chart of CZR, below, we can see that prices bottomed with the broad market in late December and rallied on shrinking volume the past five plus months. Volume was declining which is interesting if someone close to company or rather the deal knew something they did not show their hand via the technicals.
The On-Balance-Volume (OBV) line did make a new high this month and the Moving Average Convergence Divergence (MACD) oscillator was in a bullish mode.
In this Point and Figure chart of CZR, below, we can see a tentative upside price target of $13.50 being projected before the news.
Bottom line: No strategy needed here. If everything in this merger goes well we should see prices gap higher this morning and then trade up towards the deal price as the closing date approaches.