Got one...CNC

Here is a play today that started with fear, which attracts me like a shark with blood in the water:

After boosting its shares in premarket trading, investors turned sour on Centene Corp. Thursday morning as the Medicaid insurer’s announced plans to buy Health Net Inc. quickly transformed into talk of a bidding war.

Centene CNC, -6.04%  was off $4.90 to $76 as rumors swirled that the company, a smaller player in managed care, could face competition for Health Net’sHNT, +10.76%  hand by some of the industry behemoths that have been on an acquisition safari. Reports said UnitedHealth Group Inc. UNH, -1.24%  was one of those that could compete with Centene for Health Net.

Shares of Health Net jumped by 11% to $72.27 in recent action. UnitedHealth was off 1% to $122.25.

The Health Net-Centene marriage is the latest to hit the news as Anthem Inc.ANTM, -1.49% and Cigna Inc. CI, +0.16%  are reportedly in talks to merge. UnitedHealth is eyeing Aetna Inc. AET, -1.67%  and Aetna is looking at the prospect of buying Humana Inc. HUM, -2.79%

A Centene-Health Net combination of near equals would strategically pair two Medicaid insurers and offer Centene a foothold in such markets as California, and would create a company with more than $30 billion in annual revenue.

But that pales in comparison with the more than $130 billion in revenue that UnitedHealth reported for fiscal 2014. By itself, Centene had $16.6 billion in revenue last year, slightly more than one-eighth that of UnitedHealth, the industry’s largest managed-care provider.

And there are others in the sector that dwarf Centene. Anthem produced $74 billion in sales last year, while Aetna’s revenue was $58 billion. Humana reported $48.5 billion in sales as Cigna turned in $35 billion.

And then it actually bought the company. Good things ahead, right? Then people just kept freaking out about the above and then started concentrating on what the company spent and what that would mean on its balance sheets and then everyone that was day and momentum trading saw that now the stock was down and they are trading that.

NEW YORK (The Deal) --Centene  (CNC - Get Report)said Thursday it would buy managed care organizationHealth Net (HNT - Get Report) for $6.8 billion, including $500 million of debt, in a bid to keep up with rapid consolidation in health care insurance.

The terms of the deal call for Health Net shareholders to receive 0.622 shares of Centene common stock and $28.25 in cash for every share of Health Net common stock. A statement by the company noted that based on Centene's closing stock price on July 1, 2015 of $65.06 the consideration of $78.57 per share represents a 21% premium to Health Net's closing.

Centene provides health insurance plans to the under-insured and uninsured through Medicaid, Medicare and other products. Woodland Hills, Calif.-based Health Net also provides health care services through government-sponsored managed care plans and health plans to six million people across the U.S.

Shares of St.Louis, Mo.-based Centene were trading at $76 after the announcement on Thursday after closing at $80.90 on Wednesday night. Centene has a market capitalization of $9.2 billion. Health Net shares jumped 11% to trade at $72 Thursday.

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The merger of the two companies would address over 10 million members and have service revenue of around $37 billion, with Centene's growth accelerating as it provides more options to uninsured and under-insured individuals. This includes Medicare Advantage, Tricare and veterans affairs programs.

Health Net, which had been on The Deal's watch list as likely to be targeted by activist investors, had long been considered a targeted target. In its most recent quarterly report filed in May, the company reported total revenues on health plan service premiums, government contracts, net income and administrative fees for these products of $3.8 billion for the three months ended in March 31 this year, as opposed to $3.04 billion in the same time period during 2014.

"Centene has an impressive record of serving populations that have been traditionally underserved in a high-quality and consumer-centered manner," said Jay Gellert, Health Net's president and CEO, in a statement. "Our successes complement Centene very well and will lead to better offerings in line with new consumer and payer demands." 

So: lets look at the chart for today and look at the possibilities:

In looking at the above chart I see two things that can happen: First, with the technicals above, there is room for this stock to go down. The RSI however has already dropped to the halfway mark which looking at the chart, things shouldnt go below 70. And when it flashes a bottom signal, I would come in with a double down. This is a strong stock, they are now in an incredible position in the marketplace with this buyout to work with government Medicaid. The other thing that can happen is that people look at the fundimentals of this whole thing and immediately decide this and the stock snaps back over the next day or two. Either way, I think this is a good bet, bounce now or later with a double down. Below is my in:

More to come today

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