Electronic Arts, Inc (NASDAQ:ERTS) develops and sells video games for game consoles, personal computers and a variety of portable electronic devices.
The video game industry has matured into more than just games for the classic gaming consoles geared towards the more serious gamer. With portable devices like smart phones and tablets becoming available to everyone, video game companies have more outlets for content as well as an expanded customer base with those casual gamers.
On July 12th Electronic Arts, Inc (NASDAQ:ERTS) announced the acquisition of PopCap games, a developer of mobile and social media gaming. On the same date the company also upped its guidance for the second quarter. All in all things are looking solid for EA so let’s look at the charts.
On the weekly chart looking back three years note the following: After falling off a cliff in 2008, the stock price broke out of a multi-year downtrend line this past February and has never looked back since. In May and July the stock tried and failed to hold above the highs from May 2009 near $23.80.
On the daily chart we see a clear up-trend that has developed so far in 2011 and now again looks to be tested.
Zooming in close up we find that after rallying higher at the end of June/beginning of July along with the broader market, the stock has now pulled back 50% of that rally. The trade I see setting up here is as follows. A long entry around last Friday’s closing price of $23.80 accompanied with a stop order near the blue up-trend line and the 61.8% Fibonacci retracement level of currently $22.90 (give it a little room) would work well for a final profit target near $26.