Make 20% by March as Electronic Arts (ERTS) Tumbles
Feb 3rd, 2009 | By Charles Delvalle | Category: Chart of the DayI come from a generation of children that grew up playing Nintendo for at least two to three hours a day. My parents didn’t touch that “magical fun box”. But today, my generation is made up of a bunch of 28 to 34 year olds that all play video games with their kids. Because of that, the video game industry has become one of the fastest growing, and largest sectors of the entertainment industry. And even though it has shown some slowing as this recession has grinded along, growth is still there.
Too bad Electronic Arts (NASD:ERTS) simply is not feeling the love.
After rising for a number of years on increased consumer spending in video games, it’s been all downhill since the credit crunch struck back in August. Shares dropped by 70%.
Just when you thought the pain is over, we notice that on the chart ERTS recently broke under its December lows (it’s previous support line). This break under support constitutes a “Major Technical Break” and could be used to make a bearish trade with.
Shorting this stock could give you a tidy 10 – 20 percent gain by the end of the month. And if you buy a put option… well you could easily make triple-digits.
Just be careful about holding this company short for months on end. As mentioned before, the video game industry hasn’t lost money… it simply isn’t expanding as quickly.
This 70 percent drops seems extremely overdone considering ERTS is one of the top dogs in the industry.
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Charles Delvalle is a self-taught market-timing professional and value analyst who's followed and invested in the market for the past ten years. He uses a unique combination of technical and fundamental research to pinpoint rapid profit opportunities with stocks and options.
Charles is also a staunch contrarian and takes pride in finding undervalued sectors and discovering undervalued, cash-rich companies. He frequently mocks government stupidities and points out the "inaccuracies (or lies, take your pick) that government reporting frequently dispels as "truth".
