While the jury may still be out on its long-term longevity, if you're looking for quick trade, then Zynga Inc. (NASDAQ:ZNGA) may be a pretty good bet. Why's that? Though the stock got crushed in March, falling from a peak of $5.89 to a low of $3.79 hit last week, it's all part of a normal pattern for ZNGA, and that pattern suggests the game-software maker's stock is poised for a much bigger pop than what we've seen so far.
Just for the record, yes, this is the same company behind popular online games like Farmville and Words With Friends. Zynga is also the company that former Microsoft executive Don Mattrick is now heading. ZNGA is also the company that hasn't turned an operating profit ever. Yet, Zynga Inc. is the same company that is projected to swing to a profit this year on the heels of a 9.4% improvement in revenue. Next year should be even better on the sales front, by 17%. That should lead to a profit of 5 cents per share of ZNGA.
It's all encouraging, but none of those reasons are the reasons a newcomer might want to buy Zynga today. No, the reason you might want to step into ZNGA here and now is the chart - we've gotten some key clues that a rebound is underway.
The daily chart below tells part of the story. Last Tuesday, ZNGA made a long-tailed dragonfly doji, suggesting the selling effort had fully exhausted itself and we had begun the transition into a bullish mode. Equally telling is that the reversal unfurled right as Zynga shares brushed the key 200-day moving average line (green). The follow-through in the meantime seals the deal.
It wasn't just the short-term pivot on the daily chart that's pointing the stock even higher, however. When we zoom out to a weekly chart of Zynga Inc,. we can see this stock's been bouncing around inside a rising/bullish trading range since mid-2013, and the low from last week touched on the lower edge of that range. Right on cue, Zynga started to rally again, yet there's still a ton of room to tap into before a ceiling is found.
No, it's got nothing to do with the fundamentals. That doesn't mean we can't rent ZNGA for a few weeks and scrape off a solid double-digit gain for the effort, however.
Want to learn more about Zynga? It's one of the SmallCap Network Elite Opportunity's current trades. Click here to learn more about the EO's coverage of ZNGA, and how you can access it for free for two weeks.
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