What happens when you are a shareholder of a company that is acquired by another one? In the case of PSS World Medical Inc. your investment gains 30% in a day following the announcement of the acquisition by McKesson Corporation. That is exactly what is happening today regarding PSSI stock; a stock that I bought several months ago for $19.50 per share and is today trading for $28.70, gaining 32.50% from yesterday’s close at $21.63! The unrealized profit from this trade is almost $1,000 as my profit target hasn’t been hit yet. Yes, I am not looking to sell below $29, although depending on Friday’s trading activity, I might change my mind. After all, the long-term resistance level is just half a dollar above today’s PSSI stock price.
Why did I buy PSSI stock in the first place?
My decision was based on technical analysis and specifically on support and resistance levels found not in the daily or weekly stock chart, but rather in the monthly chart! See for yourself.
This is a line graph of the PSSI stock price, meaning that the price fluctuations per month aren’t included since the line is created by connecting the closing price of each month. So, although I bought PSSI stock in May for less than 20 dollar per PSSI share, the monthly stock chart fails to show that price. I suppose the support level at $20 is quite obvious, which led me to buy about 100 PSSI shares. The stop loss was set at $18.50 risking no more than $100 in this trade, in case the support level failed.
How about my profit target?
Again support and resistance levels of technical analysis proved valuable when it came down to setting a profit target. The resistance level of the all-time high of PSSI stock price is a perfect long-term target for PSSI traders to take their profits. A profit target isn’t that important to be met though. If it does, that’s good of course. However, if the stock price approaches the profit target and prints a reversal candlestick pattern, I am willing to trade out. One of the worst feelings in stock trading is to wait for a couple of cents to make a killing, and end up losing all your profits when the price collapses before the profit target is reached.
The resistance level rests at about $29. According to the acquisition agreement, McKesson will acquire all outstanding shares of PSS World Medical for $29.00 per share in cash…