As the video game industry gears up for the E3 Expo in Los Angeles that begins June 12, TradingAnalysis.com founder Todd Gordon said Electronic Arts is the gaming stock to play into the event. Here's why:
• EA is up 26 percent year to date and hovering near all-time highs. Gordon observed Thursday on CNBC's "Trading Nation" that the stock has been trading in an uptrend parallel channel for most of 2018, recently falling into a period of consolidation. Furthermore, Gordon noted a bull flag formation that leads him to believe EA will resume the uptrend toward the top end of the channel.
• The uptrend of the channel is around the $140 region, which would be another all-time high for EA
• As a result, Gordon wants to buy the July 13 weekly 131-strike call and sell the July 13 weekly 135-strike call for about $1.78 total, or $178 per options spread
• If EA were to close above $135 on July 13 expiration, Gordon could make up to $220. If EA were to close below $131 on expiration, Gordon would lose the $178 he paid to make the trade
The trade: Gordon is suggesting buying the July 13 weekly 131/135 call spread for about $1.78, or $178 per options spread.
Bottom line: Gordon sees EA soaring to record highs.