Electronic Arts Inc. (EA) is down sharply today and I noticed that I have not reviewed its charts since December writing at that time that, "Aggressive traders could go long here risking a close below $101 or just above the recent low. A close above the 50-day moving average line around $111 would be a technical reason to add to longs. A retest of the highs around $120-$121 would be the initial upside price target." Traders got to make money with that recommendation but hear in the background "what have you done for me lately?" Let's check out the charts again.
In this updated daily bar chart of EA, below, we can see that prices went on to rally to $150 but have turned lower since the middle of July. EA gapped below the flattening 50-day moving average this morning and is still weak. There is a subtle bearish divergence from the On-Balance-Volume (OBV) line which made a lower high in July when prices made a higher high. We can also see a lower high from the Moving Average Convergence Divergence (MACD) oscillator.
In this weekly bar chart of EA, below, we can see a mixed picture with respect to the indicators. Prices are still above the rising 40-week moving average line. The weekly OBV line shows weakness the past two months which indicates that sellers of EA have become more aggressive. The MACD oscillator has narrowed and could cross to a take profits sell signal in the weeks ahead. There is chart support in the $130-$120 area.
In this Point and Figure chart of EA, below, we can see that prices have reached and exceeded their downside price target of $138.
Bottom line: EA is correcting the rally from early May. The chart does not show a major top formation so for now we only see a "garden-like" correction. When prices stabilize we'll see if another long position is warranted.