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Today, we’re opening a new bullish trade on AmerisourceBergen Corporation (NYSE:ABC). The surprise judgment on Tuesday in favor of the AT&T (NYSE:T)/Time Warner (NYSE:TWX) merger is probably going to give media stocks a small boost in the short term.
We think most of the gains in media are probably priced in, but another sector that could benefit from the shift in favor of larger mergers is the drug-distributors. For example, the CVS Health Corp (NYSE:CVS)/Aetna Inc (NYSE:AET) merger is now possibly more likely.
We think the pharmaceutical-distribution and health-benefits groups have more potential upside than media, and investors will start pricing in the premium associated with an increased likelihood for M&A activity. We like ABC not so much because it has a pending merger to clear the courts, but because we expect the company to benefit from rising sentiment in its sector around these deals.
This is a short-term opportunity, but the technicals look attractive. The stock recently completed a bullish MACD divergence with a near-term target of $100.25. There is some potential for a consolidation in the $93.30 range, which traders should watch closely for an early exit.
‘Buy to open’ the ABC July 92.50 Call (ABC180720C00092500) for a maximum price of $2.25.
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