Trading Gaming Stocks On E3: Past Reactions

Electronic Entertainment Expo (E3) is an annual demonstration in June that showcases the top names in electronic gaming and their outlook for future products. Companies often bring demos of their projects planned to be released later in the year, giving customers an idea of what each product might be like once released. This revelation can create significant movement in gaming stock prices.

This year's conference was planned to take place Tuesday through Thursday June 16.

The most notable companies who perform press conferences and demonstrations include: Sony Corp (ADR) SNE, Microsoft Corporation MSFT, Activision Blizzard, Inc. ATVI, Electronic Arts Inc. EA and GameStop Corp. GME.

Related Link: Sony Is Jefferies Favorite Buy Idea Heading Into E3

A Look Back

E3 Conferences often move gaming stocks considerably against the S&P 500, mostly upward. Although there were no electronic gaming ETFs to measure the whole sector during all of the last four years, GameStop was a satisfactory method to measure sector growth since customers buy their games through the company no matter what company listed above produced them.

GameStop popped 5 percent within seven trading days after E3 started and climbed 10 percent over the next 2.5 months while the S&P 500 remained flat.

GameStop had a mixed initial reaction during E3 erasing gains on the last day of E3, but the company climbed over 20 percent during the next two months.

GameStop remained flat during E3, but the company stock price launched over 30 percent during the next two months.

Among Gamestop’s worst E3 conferences, the company dropped down during the event and -20 percent by the end of July while the S&P 500 experienced positive gains. The company fully recovered relative to the S&P 500 after 1.5 months.

Overall, gaming stocks generally show significant strength after E3 and over a two-month period, as long as immediate reactions to the conference were not negative. Investors can now trade FactorShares Trust PureFunds Video Game Tech ETF GAMR, receiving a more diverse exposure to the gaming sector than GameStop, especially when customers begin to download games rather than going into the store to purchase them.