Goldilocks and the 3 Little Gamers

Once upon a time there was a young trader named Goldilocks who while lost in the strip mall stumbled into a Gamestop (ticker:$GME) store. There she found a video game from Take Two Interactive (ticker:$TTWO). She looked at her chart.

Take Two Interactive Software, TTWO

“This stock is near the bottom of a descending triangle, on support of the 50 day Simple Moving Average (SMA)”, she said. “If it loses that support and that of the lower rail at 14.83 then it could fall to support at 13.17.” She continued,”With the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicator pointing lower, this stock is too cold to own in an uptrend.”

She went down another aisle and found a game from from Activision Blizzard (ticker:$ATVI). Again she pulled out her chart and noted,”This stock is in a long channel, maybe even a slowly narrowing symmetrical triangle. Despite the bull flag it is sport over the last few days and the rising RSI and MACD, it still has many layers of resistance from the 50, 100 and 200 day SMA’s and the top of the Bollinger bands before it can attempt any major run to the top of the channel.”

Activision Blizzard, ATVI

“Although this stock looks warmer than TTWO it still has some work to do and is not quite hot enough to buy,” she concluded. As she turned the corner and found a game from Electronic Arts (ticker:$ERTS) her eyes lit up. She pulled out her chart and noted,”This stock broke through a descending trend line in February, had a pullback into March. It is now in a bull flag at the previous high near 20 with an RSI in bullish territory and MACD that is flat lined. If this can get above 20 then it looks headed to 22 and then 22.5 on Measured Moves. This stock is heating up and just the right temperature to buy.” So she put in her buy stop order at 20.05 with a stop loss for 19.45.

Electronic Arts, ERTS

As she left the store she found her mother who asked her what she learned. After going through her discovery her mother, a seasoned trader noted, “Excellent analysis but by looking through the ‘trees’ in one particular store you missed the ‘forest’. By focusing on the games themselves you missed an opportunity that was everywhere around you.” Her mother then pulled out a chart of Gamestop and explained why.

Gamestop, GME

“You see dear,” her Mother started,”Gamestop had a failed break out of the descending triangle in December but has broken out above it again. On this break out it has risen to the resistance of the previous break out at 23.15. If it can consolidate there long enough to work off the technically overbought condition and shake off the bearish engulfing candle, then the Bollinger bands turning higher can assist it for a move above 23.15 to the next resistance level is at 25.70-26.00. Watch this one darling.” Goldilocks smiled at her mother and said, “Oh Mom, I can’t wait until I can use the internet instead of shopping at these strip malls. It seems there must be a better way than waiting for GME to come around.”

But that is the subject of another story. The End.

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