Games traders play

  • EA rallied nearly 70% in just five months last year
  • Stock near highs, but has repeatedly retreated from resistance
  • Tariff decision sends two solar stocks down different paths

Like market trends, cultural trends come and go—and sometimes come back into fashion.

Take gaming, for example. According to Morgan Stanley research, 50 million Americans jumped into gaming in 2020—a 31% year-over-year increase that more than tripled the 7% expansions from both 2018 and 2019.

But while Morgan Stanley analysts acknowledge the contraction in gaming activity from peak pandemic levels, they also argue many of the industry’s trends will likely remain intact, including increased participation across all demographics, social-gaming convergence (gaming as a key relationship and social network builder, especially for younger people), and the enhanced ability of companies to monetize through in-game “micro transactions.”1

If that outlook is correct, it could potentially provide tailwinds for gaming stocks like Electronic Arts (EA):

Chart 1: Electronic Arts (EA), 2/19/20–11/17/21. Electronic Arts (EA) price chart. Repeated tests of past highs.

Source: Power E*TRADE (For illustrative purposes. Not a recommendation.)

Although EA is still relatively close to its record highs (around $150, from January–February), it’s also been in search of a sustained tailwind since it rallied nearly 70% between March and August 2020. In the 15 months since, EA has weathered one major correction, and repeatedly (at least a half-dozen times) pulled back after testing what has become a well-established resistance level.

Price action like this highlights a trading issue that’s also relevant to longer-term investors: Deciding whether to buy on strength or weakness. While some people may wait for prices to definitively break out above this type of resistance level before buying—in effect, using the breakout to “confirm” bullish sentiment—others who embrace a longer-term bullish outlook may instead look to enter when the stock is retreating from that level in the expectation that at the very least the stock will rally to challenge it again.

Of course, using the latter approach may mean missing out on a rally (or a portion of it) if that weakness doesn’t materialize, but for many traders—and investors—the potential rewards outweigh the risks.

Market Mover Update: The following split in the intraday paths of two solar-energy stocks followed a somewhat under-the-radar legal development on Tuesday:

Chart 2: First Solar (FSLR) and SolarEdge Technologies (SEDG), 11/12/21–11/17/21 (5-min.). First Solar (FSLR) and SolarEdge Technologies (SEDG) price chart. Stocks diverge on tariff decision.

Source: Power E*TRADE (For illustrative purposes. Not a recommendation.)

The U.S. Court of International Trade overturned a decision by former President Donald Trump to impose tariffs on some imported solar panels2—a move supported by free-trade advocates but decried by some American solar manufacturers, who fear China will find it easier to flood the market with cheaper products.

SolarEdge Technologies (SEDG), which jumped after the decision, is a Chinese company. First Solar (FSLR), which lost nearly 6% on the day, is a US company.

BioNTech (BNTX) and Moderna (MRNA) both bucked yesterday’s market weakness, pushing to their highest levels in more than a week (see “Vax stocks take their shots”).

Is your breakfast getting more expensive? On top of the rallies in oats and wheat, coffee recently pushed to its highest level since October 2014. December coffee futures (KCZ1), which have rallied more than 50% since July and more than 13% over the past week, hit a new contract high of 232.45 on Wednesday.

Today’s numbers include (all times ET): Weekly Jobless Claims (8:30 a.m.), E-Commerce Retail Sales (10 a.m.), Leading Indicators (10 a.m.).

Today’s earnings include: Canadian Solar (CSIQ), Applied Materials (AMAT), Kohl's (KSS), Alibaba (BABA), (JD), Macy’s (M), Ross Stores (ROST), Palo Alto Networks (PANW), Workday (WDAY), Intuit (INTU).

Today’s IPOs include: KinderCare Learning Center (KLC), Sweetgreen (SG).


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1 Into the Metaverse: Why Gaming Could Level Up in 2022. 11/5/21.
2 Reuters. U.S. judge rejects Trump tariffs on imported solar panels. 11/16/21.

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