Is Electronic Arts Winning or Losing the Game?

 | Jul 13, 2017 | 11:12 AM EDT
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Electronic Arts (EA) has been trading sideways for more than two months, correcting the strong April-May advance. Prices looked soft heading into late June/early July but they have firmed recently. The key question right now is whether EA can soon break out over its June peaks or whether prices need to correct longer or deeper.

A check of the charts and indicators may help us with a strategy.

In this daily bar chart of EA, above, we can see prices tested the rising 50-day moving average line a number of times but EA has managed to close back above this indicator. The rising 200-day moving average line is comfortably below the current price level. The On-Balance-Volume (OBV) line declined through June, telling us that sellers of EA were more aggressive with heavier volume being traded on days when EA has closed lower. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line, which is bearish, but it could be crossing upward for a cover-shorts buy signal.

In this weekly bar chart of EA, above, we can see prices are above the rising 40-week moving average line. The weekly OBV line has risen to a new high recently, which helps to confirm the advance. The MACD oscillator on this timeframe narrowed toward a bearish crossover but now looks like it will not cross.

In this Point and Figure chart of EA, above, we see the consolidation pattern since May (look for the 5 on the chart). The price weakness down to $105.49 turned the chart bearish and yields a potential price target of $96.45.

Bottom line: The daily and weekly indicators on EA are mixed -- some bearish and some bullish. Strength to $116.52 will open the way on the upside while a decline to $104.44 is likely to precipitate further declines.

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