Extreme Trades for the Week of September 17, 2018September 16, 2018
Trade No. 1 — Electronic Arts (EA)
The pullback in Electronic Arts is a buying opportunity.
In recent months, the stock fell after the company delayed the release of Battlefield V to November 20, 2018. Then. It lowered its full-year guidance on the delay. While part of that lowered guidance was because of the game’s delayed launch, EA said $115 million of the change was because of revised expectations regarding foreign-exchange rates, according to The Wall Street Journal.
It’s why the stock plunged from $135 to $110 in recent weeks.
But again, it’s an overreaction that appears fully price into the stock.
Technically, it appears to be a disaster with no shot at a comeback. But look closer. The stock is now at double bottom support, and it’s sitting at its lower Bollinger Band (2,20). In addition, RSI is back to a November 2017 low. MACD is historically stretched.
And Williams’ %R is back below its 80-line.
From here, we could see a bearish gap refill around $125.
The other reason the stock could bounce is because the delay is not really a bad thing. It will actually allow the company to release the game after two other hot releases. Take Two’s Read Dead 2 is expected late October 2018, and is already expected to be a monster seller. In mid-October, Activision Blizzard is releasing Call of Duty: Black Ops 4, which is another big release.
So, by releasing its game in November, it gives the company breathing room.
Then again, EA isn’t dependent on a single game at all. It’s oversold and ready to move. Plus, we’re heading into the holiday season again.
There are two ways to trade EA here.
One is to buy to open the EA October 19, 2018 115 call at market on Monday morning. The other way is to buy to open the EA November 16, 2018 120 call on Monday morning.
Trade No. 2 — Pandora Media Inc. (P)
After recovering well off a low of $4, Pandora has rallied to $9.90. While it’s been an impressive run, we don’t believe the rally is over. Analyst Laura Martin has boosted her target to $13 from $8, on prospects for faster sub growth from a focus on partnerships, and lower customer acquisition costs. Minimum CPM prices per ad unit will shake out the ones with the lowest profitability, she says, and the company will execute better in other ways, including cost efficiencies.
Buy shares of Pandora at market.
Trade No. 3 — Geron Corporation (GERN)
The biotech’s lead pipeline candidate, imetelstat, is also its only pipeline candidate. It’s very possible that Geron could soon receive some very good news for its candidate. Johnson & Johnson is currently collaborating with Geron on evaluating the drug in a phase 2 clinical study targeting treatment of myelofibrosis (MF) and in a phase 2/3 clinical study for treating myelodysplastic syndromes (MDS). By the end of September 2018, Johnson & Johnson will decide if it will continue developing the drug. The good news is that all signs are pointing to a positive outcome with Johnson & Johnson, as they continue to feature imetelstat in pipeline updates as one of four new oncology drugs that it expects to submit for regulatory approval by 2021. Should Johnson & Johnson continue, it could be big news for the GERN stock.
GERN would receive a $65 million milestone payment. In addition, the chances of Geron having its first product on the market within the next few years would increase. While it’s a speculative bet at the moment, we believe the reward outweighs the risk.
Buy shares of GERN at market.