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All Allan of Allan Jul 19, 2008 Email this article to a Friend  Printer friendly page

Following up on the MWY idea, first let's look at the longer term chart below (click it for bigger image). MWY was in a long downtrend, falling from above 15 to below 2 in a little over three years. The Triangles picked up some good long-term trades, Selling at 15, Buying at 11, Selling again at around 8 and finally Buying at 2.76 on April 1st. So while the stock fell 80% in that time frame, trading just the Triangles made 40%. Based on purely mechanical criteria, MWY


The Weekly chart shows just a slightly different perspective, suggesting that a good hard close above 3.00 will signal a breakout that targets 6-7:

Notice how the Volume bar from the most recent week's action is the highest volume since last December. Friday represents a 3-month breakout, a close over 3.00 represents a six-month breakout.

For our Confirmatory Fundamentals, Midway is indeed coming out with a Batman themed video game:

is on a Buy.

CHICAGO - April 18 , 2008 – Midway Games Inc. (NYSE: MWY), a leading interactive entertainment software publisher and developer, today announced Mortal Kombat® vs. DC Universe, licensed by Warner Bros. Interactive Entertainment. When a cataclysmic force merges conquerors from two universes, conflict is inevitable. Kombat forces friends to fight, worlds to collide, and unlikely alliances to be forged. In order to save all they know, the heroes and villains of Mortal Kombat must wage war against the combined might of the DC Universe (DCU). How can either side prevail when rage blinds them to the dark threat poised to destroy them all?

For the first time ever Scorpion, Sub Zero and the warriors from Midway's billion-dollar fighting franchise face off against Batman, Superman and other iconic and powerful DC Super Heroes, featuring signature attacks for both sides and a unique and intertwining storyline, written as a collaboration between the Mortal Kombat creative team and top comic scribes Jimmy Palmiotti (Painkiller Jane, Marvel Nights, Jonah Hex, 21 Down) and Justin Gray (Batman: Legends of the Dark Knight, JLA Classified, Punisher Red X-Mas, The Resistance) MK vs. DCU is slated to ship for the PLAYSTATION®3 computer entertainment system and Xbox 360® video game and entertainment system from Microsoft in Fall 2008.

Also noteworthy, look at how Midway stacks up against Electronic Arts in terms of market cap versus annual revenues.



ERTS sells at about 5 times annual revenue, while MWY sells at less then 2 times revenue. If MWY traded at only 3 times revenue, it would be trading at about $6.00 per share. At 5 times revenue, about $9.00 per share.

Finally, look who else owns Midway:


Sumner Redstone's daughter, Sheri Redstone, is the Chairman of the Board of Midway Games. Whoever is calling the shots, shareholders should be in good hands, i.e. going forward, nothing bad will be allowed to happen.

All of this adds up to a pretty good bet here. MWY is a good trade at current levels, but a really good, almost great trade at any close above 3.00, especially on good volume. Of course there is no guarantee this will work and I allow for 50% of all my trades not to work. It's the 50% that do work that make this all worthwhile. MWY has all the characteristics I am looking for to end up in that winning 50% group.

by All Allan (Allan)

Disclaimer:

Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests.

Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk.

There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital.