Electronic Arts, Inc. and Take-Two Interactive Software, Inc. ramped higher on Tuesday following the news that Activision Blizzard, Inc will be acquired by tech giant Microsoft Corp.
Both stocks have been trading in a months-long period of consolidation after reaching all-time highs in February 2021. Electronic Arts has been trading in a mostly sideways pattern between $120.08 and $148.92 since reaching a new all-time high of $150.30 on Jan. 25 and Feb. 2, 2021.
Take-Two has suffered two fairly steady declines that have brought the stock down over 35 percent from its Feb. 8, 2021 all-time high of $214.91 to a low of $138.19 on Jan. 10, where the stock found buyers and bounced.
On Tuesday, Electronic Arts and Take-Two confirmed trend changes to the upside on their daily charts, although both stocks ran into sellers and profit takers on the surge higher. If the stocks are able to continue trading in their uptrends, both Electronic Arts and Take-Two could be headed for new highs, with Electronic Arts possibly heading for a new all-time high.
It should be noted that events such as the general markets turning bearish, negative reactions to earnings prints and negative news headlines about a stock can quickly invalidate bullish patterns and breakouts. As the saying goes, “the trend is your friend until it isn’t,” and any trader in a bullish position should have a clear stop set in place and manage their risk versus reward.
What’s Ahead For The Stocks? Both Electronic Arts and Take-Two are set to print their third-quarter fiscal year 2022 earnings results in the upcoming weeks, with Electronic Arts reporting on Feb. 1 and Take-Two on Feb. 7.
When Electronic Arts and Take-Two printed their third-quarter earnings results on Nov. 3, the stocks had similar reactions by gapping up the following trading day and then declining 18 percent and 18.5 percent, respectively, over the course of that month before beginning to rebound on Dec. 2.
The Electronic Arts Chart
Electronic Arts confirmed its uptrend on Tuesday when it popped up above the Jan. 13 high of $133.03.
- The most recent higher low was printed on Friday at $128.72, and when Electronic Arts prints its next higher low, it will need to be above that level or the uptrend will be negated.
- The gap below between $130.75 and $135.89 may concern some bullish traders because gaps on charts fill about 90 percent of the time. Ideally, bulls would like to see the stock fill the gap when it prints its next higher low.
- Electronic Arts has resistance above at $138.59 and $141.25 and support below at $135.43 and $133.03.
The Take-Two Chart
When Take-Two shot up to the $160.85 mark on Tuesday morning it printed a higher high and also almost completely filled an upper gap that was created on Jan. 10.
- When Take-Two prints its next higher low, it will need to be above Friday’s low-of-day at $149.41 for the uptrend to remain intact.
- Bullish traders will eventually want to see Take-Two regain the eight-day exponential moving average as support for more confirmation that the uptrend will continue for a longer period of time.
- Take-Two has resistance above at $161.33 and $167 and support below at $151 and $144.58.
By Melanie Schaffer
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