ZNGA Update

ZNGA is one of the stocks we have been paying attention to as a longer term long position as it looks like it has been building a base recently in which it can rally off of. I don't know how the recent relationship changes with FB will effect ZNGA, I suppose there's both good and bad that can be taken away from the recent changes, but I would think they wouldn't move forward with these changes if they didn't feel they were beneficial.

So far I don't see anything that suggests ZNGA is doing anything more than undergoing the basing process; I still like ZNGA as a longer term long position as it continues to build this base, but remember bases and tops are always the most volatile area of the 4 different life stage or cycles of a complete trend.

 Long term daily chart showing a transition from a down trend to a lateral trend which appears to be a base, there are other indications suggesting this is the highest probability. The two white arrows represent capitulation area, this is like all the weak hands selling at once and it's only after this happens that a new base and new bullish trend can be put together.

 Here we see more recent action on a daily chart, we see the last and largest capitulation area characterized by a gap down and heavy volume, that area is also acting as resistance, most likely the upper range of the base for now and ZNGA seems to be headed down to the lower range where it seems to be accumulated more heavily.

 A long term 4 hour 3C chart shows distribution at the top of ZNGA's price for the year and recent leading positive divergences in the base area, this is a very long timeframe with very significant implications.

At the 15 min chart we see the same trend in the basing or lateral area, a leading positive divergence.

 When we get to the 10 min chart, still influential, but not as influential as the longer timeframes and shows more in the way of detail, we see a negative divergence at the area that created the last capitulation gap that is acting as resistance for price now and we see a positive divergence at the bottom of the range and as it approaches resistance again a negative divergence likely to send it back to the lower end of the range to see another positive divergence, this is the typical behavior of a base, this action plays out over and over, thus the lateral trend we see in bases so frequently.

 The 5 min chart shows the same and is pretty much redundant. While there may be some volatility intraday and day to day, I would expect ZNGA to head toward the lower end of the range to be accumulated at better prices as we have seen in the past.

While ZNGA did move directionally with FB for a while on many days, I can't say whether it is still doing so, but I had warned about FB and considering taking profits as it looked highly likely it would pullback, here's the 5 min FB chart below doing exactly that.