For a company on the giving end of a $40 billion acquisition, shares of Phelps Dodge ( PD) are acting wacky. Last week, the copper mining giant announced a three-way merger with Canadian nickel miners Inco ( N) and Falconbridge ( FAL). In the ambitious transaction, Phelps Dodge will be the acquirer, with Inco first swallowing Falconbridge and Phelps then gobbling up Inco using a mix of cash and stock. As often happens in dilutive mergers, shares of the acquirer dropped on the news, falling 9.5% in the three days following the June 26 announcement to $75.05. Most observers believed the hefty 22% premium for the purchase of Inco was the reason for the price drop. Then shares of Phelps began to do the unexpected: They rallied. On July 3, Phelps closed at $83.67, up 11% from its post-deal low and even higher than before the deal was announced. At last check, shares were trading at $82.12, about the same as its predeal close. Why the turnaround? Market sources suggested a number of possible reasons. Certainly, a broad lift in commodity prices after the Federal Reserve's dovish comments last week helped stabilize the price. Shares in other metals producers have risen, including BHP ( BHP), which is up 6.8% in a week. Meanwhile, shares of Inco and Falconbridge are both up about 4%. An alternate theory holds that traders are scooping up Phelps Dodge for a different reason: They believe the deal is in trouble. If the deal dies, shares of the copper mining company won't incur the dilution that would occur from making the acquisitions. That, in turn, could leave Phelps vulnerable to a takeover itself. Concerns about the deal's viability have prevented traders from aggressively shorting shares of Phelps Dodge, say market sources who declined to be identified.