The on-again, off-again merger talks continue between CBS (CBS - Get Report) and Viacom (VIA - Get Report) (VIAB - Get Report) .

The two companies have taken part in a long-time all-stock merger negotiation that has seen its fair share of drama. However, the two were reportedly close to hammering out a deal Sunday evening, which left many investors expecting one to be announced Monday morning.

Shares of Viacom (VIA) were down about 4.2% in midday trading, while B shares (VIAB) were down about 4.7%. CBS stock was down about 1.6% halfway through the day.

Given the "Merger Monday" news, it's no surprise that Viacom is Real Money's Stock of the Day. As Kevin Curran wrote in his Real Money piece, "The combination of the companies would carry a significant amount of content under one umbrella, aiding a larger streaming play than CBS' recently announced 'All Access' venture," an almost necessary move as consumers continue to cut the cord.

While streaming may make the merger a need as much as a want, Curran also notes that, "To be sure, the deal between the two companies has been discussed for years, leaving many skeptical on the status of negotiations after so many false starts."

Viacom is also a holding in Jim Cramer's Action Alerts PLUS member club. Want to know his latest thoughts on Viacom and be alerted before Jim Cramer buys or sells VIAB? Learn more now.

Trading Viacom Stock

Daily chart of Viacom (VIA) stock.
Daily chart of Viacom (VIA) stock.

From its March lows, Viacom stock was putting in a series of higher lows, emphasized by the blue uptrend line on the chart above. This level acted as support, buoying VIA stock over the past few months.

Range resistance has been very clear in the $36.50 to $37 area, a zone that Viacom stock failed to penetrate on three major attempts in June and July.

Just a few sessions ago, on Thursday Aug. 8, Viacom stock initially broke below, but held its 50-day and 20-day moving averages near $34.80. This was constructive price action for the bulls, as uptrend support and the stock's major moving averages were challenged yet remained valid.

However, they broke down on Friday and now on Monday we're seeing even more selling. Short of a late-session rally, VIA stock looks set to close well below its 200-day moving average. Bulls now need to see Viacom stock reclaim the $33.60 to $33.75 area, with the 200-day at the latter. Back over the 200-day can send Viacom back up to its 20-day, currently near $34.65.

If Viacom can't rally or if the 200-day acts as resistance, the $32 to $32.50 area is in play on the downside. $32 has been a level of range support over the past year, while the 50% retracement comes into play near $32.50.

Below this mark and the 61.8% retracement near $31.20 is possible.

But remember to take it one step at a time. Let's first see how Viacom stock handles potential confirmation of the deal. Short of reclaiming the 200-day, its first downside target area between $32 and $32.50 will be key in how VIA acts going forward.

This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.