While everyone is digesting the news from the Federal Reserve, investors in Electronic Arts (EA) are weighing the possibility of M&A.
The videogame stalwart’s shares were up as much as 17% in the premarket, and at last check were up about 5%, following reports that Amazon (AMZN) might be mulling an acquisition of the company.
The move in the premarket sent Electronic Arts stock up to a key resistance area, which we’ll discuss in a moment.
Perhaps helping improve sentiment around the possibility of such a deal, Microsoft (MSFT) has a pending acquisition of Activision Blizzard (ATV) .
While reports about Amazon’s interest in EA have conflicted, EA seems like a chart worth a second look.
Trading EA Stock
In 2018, EA stock rallied up to the $150 mark before collapsing about 50% heading into 2019. Since then, the $150 level has been very stiff resistance and again rejected the stock in 2021.
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Since then, downtrend resistance has been pressuring the stock, while buyers have shown up at uptrend support and the $110 area. The $110 level was major support in 2020, was not tested in 2021 and was again strong support in 2022.
In essence, the stock is trapped in a wide range between $110 support and $150 resistance.
The stock is doing a good job holding the $125 to $130 area, but the worry becomes the binary nature of such a report. A buyout is either on the table or off, and if it’s off the table, the stock risks a move lower. If it’s on the table, the stock would rocket.
In the case of “no offer,” the $120 area becomes of interest on the downside. It’s where we find the third-quarter low and the 200-week moving average. A break of that puts the key $110 area back into play.
On the upside, it’s not that complicated either. But a buyout price would go a long way towards EA stock pushing higher.
Specifically, I’m keeping an eye on the 21-week moving average, which has been resistance all month, while EA stock has back-to-back weekly highs of roughly $135.80.
A move above this area opens the door to downtrend resistance (blue line). That’s kept the stock in check for more than a year.
If EA stock can break out above this level — as it technically did in the premarket session — it opens the door to $150 resistance.