Nintendo Co., Ltd (ADR): Can Pokémon Go Send NTDOY Stock Higher?

Nintendo CoMore Upside for Nintendo Stock?

Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) never ceases to amaze me. Every time I think it is down and out for the count, Nintendo stock finds a way to reinvent the wheel and surprise all the naysayers. The company did it the first time with the “Wii” and it’s doing it again with “Pokémon Go.”

This new app has taken the world by storm—an instant viral success that has driven NTDOY stock’s price up 112% in just eight trading days.

The volatility in NTDOY stock’s price did not end there. When news broke that Nintendo is not the sole owner of the Pokémon Go app, it caught some investors off-guard and drove share prices lower by 35% over a five-day span.

Does this spell the end for NTDOY stock?

I am not ready to throw in the towel yet and here’s why…

If shares can hold at the support level, it would suggest that there is more to the story for Nintendo stock. I would even go as far as to suggest that even though Nintendo only owns 32% of the app, the new source of revenue and engagement numbers are enough to drive the share price of NTDOY stock higher.

The following two charts illustrate the support that needs to hold for the bullish camp:

Nintendo Co., Ltd (ADR) OTCMKTS Chart

Chart courtesy of www.StockCharts.com

Fibonacci retracement numbers (highlighted in green in the chart above) are a very popular tool. Used by many technical traders, this tool is used to identify counter-trend price objectives. In theory, when a stock pulls back from a primary trend, shares will retrace approximately 50%–62% of the primary move. This zone will then offer support, as traders will be eyeing this area to enter long positions or cover short positions.

Shares of NTDOY stock are currently trading at $25.56 and are testing the 62% Fibonacci retracement level.

The same price point appears as support in the following chart:

Nintendo Co., Ltd (ADR) OTCMKTS

Chart courtesy of www.StockCharts.com

In 2015, Nintendo stock tried with valor to break above the $24.75 level. After multiple attempts, shares were unable to break through. This level marked the resistance level, a major price area where sellers were willing to step in and overwhelm the buyers.

On July 8, NTDOY stock shattered the resistance level when the share price gapped above it. The gap that appears on the chart is known as a breakaway gap. Breakaway gaps signal that a new trend has started. They also have the great quality of rarely getting filled. Don’t expect share prices to return to $20.74.

As is always the case in charting, when a resistance level is broken, it becomes a level of support. The $24.75 level should hold off the bears.

The prices in between $24.75 and $25.00 now mark support. The significance of this price area is two-fold. I expect a bounce from this level at the very least.

The Bottom Line on NTDOY Stock

The support level must hold for the bull camp. It signifies a battle line, which is currently being tested. I fully expect a bounce from this level. If shares fail to hold support, NTDOY stock can retrace the entire move and end up right back where it started. Failure to hold this support would signify a win for the bear camp. As it stands, support is being tested, but the bulls have the upper hand in Nintendo stock.