The Market Has Already Handicapped the Brewing Cable Merger (TWC, CMCSA, CHTR)

The cable-television M&A chatter is making its rounds again, this time with Charter Communications, Inc. (NASDAQ:CHTR), Time Warner Cable Inc. (NYSE:TWC), and Comcast Corporation (NASDAQ:CMCSA) pegged as the three points of the ever-changing parties of a never-ending love triangle. The buzz is, well, was that CHTR was first in line to nab TWC. Today, however, it's starting to look like CMCSA is more seriously interested in Time Warner Cable than first thought. TWC shares jumped on the doubly-good news that it may well become the prize in a bidding war between Charter Communications and Comcast Corporation. Meanwhile, CMCSA shares have jumped (albeit not quite as firmly) on the prospect of its ownership of TWC. What's interesting - and perhaps telling - is the fact that not only have CHTR shares not soared in the wake of what would normally be viewed as good news, but Charter shares have actually stumbled heading into the possible bidding war. Might this be an omen of what's actually in store for Charter Communications?

Ever heard the expression "the market is never wrong"? Yeah, well, it's not true - the market is wrong sometimes. It's true enough, however, that we may want to heed the hints being dropped by the current chart of CHTR.

That hint is, in simplest terms, that Charter Communications, Inc. is somehow going to come out a loser in this race. The specific technical clues are (1) a recent cross under the gray 100-day moving average line, and (2) the fact that all it took for the stock to rollover today was a brush of the purple 50-day moving average line, and presto... CHTR fell back under the 100-day line. Today was the best shot the stock had at joining the same uptrend that Time Warner Cable and Comcast Corporation shares are both enjoying. The fact that CHTR shares are not only not up but are particularly weak says loud and clear that nobody has much faith in the company at this point.

That's not to say CMCSA or TWC are buys either, now that both stocks have surged, largely pricing in the upside of a potential union of the two companies. It's just an observation that CHTR poses a significant amount of risk, largely fueled by an outsized runup that's now putting a lot of pressure on the stock.

With all of that being said, there is one bastion of hope left for Charter Communications shareholders, and that's the support line around $126.00. As long as that floor holds up, CHTR will remain in the proverbial hunt. If that floor breaks down though - as it looks like is on the bears' agenda - then the tide could fully turn in a bearish direction. Even before that happens though, we may want to listen to what the market is telling us by looking at what's NOT happening with CHTR.

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