The American video game company headquartered in Redwood City, California, Electronic Arts Inc. (NASDAQ: EA) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Downtrend Channel Breakout: The daily chart shows that the stock was trading within a downtrend channel for the past few months. This channel is marked in the daily chart in purple color. Currently, the stock has broken out of this channel with high volume, indicating that it has the potential to surge ahead.
Daily Chart – EA
#2 Above MAs: The stock is currently trading above its short-term moving average of 50-day SMA as well as the long-term moving average of 200-day SMA. This indicates the overall bullishness of the stock.
#3 MACD above Signal Line: As you can see from the daily chart, the MACD line (blue color) has currently crossed above the MACD signal line (orange color). This indicates a possible bullish bias.
#4 Trendline support: The daily chart shows that the stock is moving higher after taking support near the uptrend line, which is marked in pink color. This is a possible bullish indication.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#6 Bullish Stoch: The %K line is currently above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#7 Fibonacci Support: The weekly chart shows that the stock had bounced back higher after taking support at the 50% Fibonacci level and is currently above the 61.8% Fibonacci level. This is a possible bullish sign.
Weekly Chart – EA
#8 Cup and Handle Pattern: The weekly chart shows that the stock has been forming a cup and handle pattern. This is marked in the chart below in purple color. A cup and handle pattern is a consolidation and breakout pattern. A breakout from this pattern would indicate that the stock could move higher. Typically, stocks retrace to the breakout level again before continuing the upmove.
#9 Bullish RSI: The RSI is currently above 50 and moving higher in the weekly chart. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase the shares of EA if it closes above the nearest resistance area, which translates to a price of around $130.00.
TP: Our target prices are $140 and if it closes above that level, $150 in the next 3-6 months.
SL: To limit risk, place a stop loss at $123.60. Note that this stop loss is on a closing basis.
Our target potential upside is almost 8% to 15% in the next 3-6 months.
For a risk of $6.40, our target rewards are $10.00 and $20.00. This is an almost 1:2 and 1:3 risk-reward trade. In other words, this trade offers 2x to 3x rewards when compares to risks.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the channel. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara