$26.98 Might Be The Top For Electronic Arts Inc. (NASDAQ:EA)

Denver, CO, 07/25/2013 (Avauncer.com) – Electronic Arts Inc. (NASDAQ:EA) (Closed: $25.41, Up: 6.65%) surged about 13% early in the session yesterday but failed to protect its gains later on and closed after losing about half of its gain. The volume was very high at 15.5 million, much more than the average of 4.5 million. In the process, the price created a Shooting Star candlestick with a very long Upper Shadow. This pattern shows a lot of profit booking at the higher levels and has bearish connotation. A down day today would make a very bearish Evening start pattern, which would confirm a top in the place.

Any price move has the tendency to stop, initially at least, at the last major corrective swing high or low. In Elliot Wave theory, we can see such examples a lot when at the end of a Flat or a Zigzag correction, the price bounces to the top/bottom of the prior B wave, or in case of an impulse move, the top/bottom of 4^th wave.

In this case, a look at the long term charts show that the huge intraday rally of the last session faced selling after reaching the last major swing high of $26.13, the November 2011 top. That high is the place, where the corrective rally, a Flat correction, from the 2009 bottom of $14.24 was terminated. If the weakness is confirmed by further price action, we can expect a decline to $16.5 - $17 levels in the coming months. Obviously, a lot of supports are there before that. The levels of $24.45 - $24.50, $19.50 -$21 are to be watched in case of a fall.

The indicators like MACD & RSI are highly overbought in the weekly timeframe with some negative divergence, which is also visible in the daily charts. The price will confirm this weakness only if it moves below $24.40 and $23.80.