Stay Neutral on Electronic Arts Ahead of Earnings

We last wrote about Electronic Arts (EA) back on May 5, writing that, "Sometimes it is hard to wait for a breakout. We like to see stocks move immediately, if not sooner. EA looks ready for new highs but traders should wait for a trade at $120 before going long. Risk below $10. The first price target is $134."

EA left our $134 price target in the dust by early August but then suffered a correction into early November. Prices are in a new uptrend ahead of earnings that are due out after the close on Tuesday.  

Let's check on the charts again. 

In this updated daily bar chart of EA, below, we can see that prices made a slight new high recently but have stalled. Prices are still above the rising 50-day moving average line and above the rising 200-day moving average line. Trading volume was heavy in November when prices bottomed but did not really explode when prices made a new high.

The On-Balance-Volume (OBV) line has followed prices higher and lower. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been pointing lower since late December and tells us that the trend strength is fading. 

In this weekly bar chart of EA, below, we see a mixed picture. Prices are in an uptrend above the rising 40-week moving average line as they test or retest the highs of 2018.

The lagging 40-week moving average line has a positive/bullish slope, but the weekly OBV line shows weakness from early December telling us that sellers of EA have been more aggressive ahead of earnings.

The MACD oscillator is above the zero line but narrowing in recent weeks. This is not what I would call a robust picture.  

In this daily Point and Figure chart of EA, below we can see a potential price target of $178.  A trade at $139.38 would weaken the picture.  

In this weekly Point and Figure chart of EA, below, we can see a potential price target of $209.

Bottom line strategy: I have no special knowledge of the quarterly numbers for EA but the charts are not a screaming buy at this point in time. The longer-term picture is positive so I would be neutral/flat on EA waiting to see the reaction.

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