Shares of Electronic Arts (EA) are soaring in early trading Friday on unconfirmed reports that the company is considering selling itself in a takeover and has held talks with a number of potential buyers, including Amazon (AMZN) .
I have no special knowledge of any rumor or talks but let's check out the charts.
In the daily bar chart of EA, below, we can see the price activity through Thursday's close. The shares show a longer-term downward channel. Prices have rallied above the declining 200-day moving average line a number of times but never mounted a sustained advance.
The On-Balance-Volume (OBV) line shows improvement from December but weakness from June. The Moving Average Convergence Divergence (MACD) oscillator is only slightly above the zero line suggesting little in the way of trend strength.
In the weekly Japanese candlestick chart of EA, below, we can see some interesting clues. Trading volume dried up dramatically in recent weeks. If there was a pending takeover announcement I would expect trading volume to increase. Just saying.
The weekly OBV line shows weakness in August so far. The recent candles show an upper shadow followed by a lower shadow. The MACD oscillator is struggling just below the zero line.
In this daily Point and Figure chart of EA, below, we can see a downside price target of $117.
In this weekly Point and Figure chart of EA, below, we can see that same price target of $117.
Bottom-line strategy: Sometimes where there is smoke there is fire and other times not. The charts and indicators of EA are not strong enough to recommend purchase.
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