We last wrote about Electronic Arts (EA) in early November, and our strategy was, "Only three things can happen from here: EA can go up, down or sideways. We can ignore a sideways move for now. If EA pulls back and tests and holds anticipated support around $75, I would look to be a buyer risking a close below $71. If EA rallies from here, I want to buy strength over $86."
As it turns out EA, declined to $74 by early December and started to rally. EA is still in that up-leg from early December, but a fresh look at the charts and indicators is warranted.
In this daily chart of EA, above, we can see prices have made higher highs, but the On-Balance-Volume (OBV) line has not confirmed those highs and recently in February and March the momentum study has slowed even as prices have made new highs. This difference between the price action and momentum is called bearish divergence -- a yellow traffic light or warning that the next light could be red.
In this weekly chart of EA, above, we can see the trend is still up with prices above the rising 40-week moving average line. On the weekly OBV line, we see it has kept up with the price action. In the lower panel is the MACD oscillator, which is in a bullish mode above the zero line.
Bottom line: The net effect of a cautious daily chart but still bullish weekly chart is likely to be some near-term consolidation. If you are long from November or December, I would consider raising sell-stop protection to a close below $85 to lock in gains.