Managed care provider Centene Corp. $CNC announced plans to acquire smaller rival WellCare Health Plans $WCG for $17.3B. Here's a summary from thestreet.com: Centene will acquire WellCare in a cash-and-stock transaction for $305.39 a share based on Centene's closing price Tuesday of $54.85. WellCare shareholders will receive a fixed exchange ratio of 3.38 shares of Centene common stock and $120 in cash for each WellCare common share. The deal has been approved by the boards of both companies. Centene and WellCare expect to complete the merger in the first half of 2020. From Centene to Buy WellCare in Deal Valued at $17.3 Billion (thestreet.com) The initial reaction was the classic reaction for an acquisition - the buyer dips while the target company rallies. CNC Daily Chart (click to enlarge) Bearish Continuation:- The suitor, Centene, has been trading lower since the end of 2018. - It revived the bearish trend in February even though the general market continued to recover. - The $54.25 area was a support pivot and 2018-low. - A classic reaction to a company acquiring another is usually negative because in general, acquisitions tend to be messy, and often destroy value. - Add to that the fact that CNC was already in a bearish trend, and I think we can expect further downside in CNC in the short to medium-term.- If price closes under $50, I think the market will trade it down towards the $42-$44 area, which was a previous resistance that could turn into support. It also involves the 200-week simple moving average. - On the weekly chart, we can see that the long-term trend has been bullish. But again, the short to medium-term outlook is likely bearish. - Also at this point, the previous support in the $54-$54.50 area might become resistance if CNC share price pulls back up. CNC Weekly Chart (click to enlarge) Most acquisitions are made with a premium. The sale usually benefits the sellers at least in the short-term, and this was the case for WCG. Moreover, this is a larger company rolling up a smaller competitor. We are likely to see the smaller company gain from being folded in a larger distribution network. WCG Daily Chart (click to enlarge) Bearish Correction- Before the acquisition announcement, price was in a bearish correction mode and entering another downswing after the late-December-January recovery.- Price was about to revisit the $222 low before the announcement gave WCG a boost. - I think the $220-$222 area is now reinforced, so even if price comes back down to this area, I would expect support.- A break however can open up the $200 area, which is another key support level.Resistance:- To the upside, there is resistance around $263.- I think if price closes above $265, there will be at least short-term upside to the 2019-high around $280 (price tagged $288 intrasession as well). - Then, we can anticipate the rally to what CNC is acquiring MCG for around $305.39 a share.- A slightly more aggressive bullish outlook for WCG in 2019 is the 2018-high around $325.- This of course assumes no complications with the deal that would delay it or restructure it for a less favorable price tag.