Take Care in Approaching Take-Two Interactive From the Long Side

 | Aug 07, 2017 | 10:40 AM EDT
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Take-Two Interactive Software Inc. (TTWO) gaped to the upside last week. Will this gap become a runaway gap or what is also called a measuring gap, or is there a risk that this could be an exhaustion gap? These two kinds of gaps initially look the same, but they have much different outcomes.

Unfortunately we won't know what we are dealing with right away. In the meantime, let's see check the price action and the indicator status leading up to this gap.

In this daily bar chart of TTWO, above, we can see the strong advance over the past 12 months. You did not have to buy the exact bottom to have you investment double. Prices have remained above the rising 50-day moving average line for much of the time and dips to the line have turned out to be buying opportunities. The rising 200-day moving average line is bullish, but prices are extended on the upside or at their widest point to the average line over the past 12 months.

The daily On-Balance-Volume (OBV) line has been improving irregularly the past year. In the lower panel is the 12-day momentum study, which shows lower momentum peaks from May to July but a recent spike higher this month.

In this weekly bar chart of TTWO, above, we can see that prices are above the rising 40-week moving average line. Dips to the 40-week line were good buying opportunities looking back over the past three years. The weekly OBV line made a new high to confirm the new price highs. The weekly Moving Average Convergence Divergence (MACD) oscillator narrowed last month but it never crossed. The MACD oscillator remains in a bullish configuration.

In this Point and Figure chart, above, we can see the uptrend displayed without gaps and without volume. There is a longer-term price target shown that measures to the $104/$105 area.

Bottom line: The trend is up, but I would be careful as a pullback could happen. I would raise stop protection to a close below $76 and I would want to see some more price action before adding to longs at current levels.

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