We’ve seen mostly bullish reactions out of earnings so far, or at least it seems that way in tech. However, that’s not the case with Electronic Arts (EA).
Shares of Electronic Arts are down almost 13% at last check, as investors unload their holdings after disappointing quarterly results.
Earnings beat analysts’ expectations but net bookings declined more than 9% year over year and missed estimates. The market would have likely looked past that number had it not been for next quarter’s guidance.
Management gave a subpar earnings outlook and a revenue forecast that called for $1.7 to $1.8 billion in sales, well below expectations.
As drama continues to swirl around the Activision Blizzard (ATVI) and Microsoft (MSFT) deal, and as Take-Two Interactive Software (TTWO) shares continue to struggle too, there’s simply not much love for video game stocks right now.
Trading Electronic Arts Stock on Earnings
Chart courtesy of TrendSpider.com
Zooming out to the weekly chart for Electronic Arts stock, notice how the stock has been putting a long series of lower highs after shares failed to break out over $150 resistance.
This development of lower highs is a bearish technical pattern, particularly when combined with failing support levels. The latter is currently underway now, as EA breaks below the 200-week moving average and uptrend support (blue line).
If there’s a silver lining here, it’s that there’s one very clear level to watch on the downside: $110.
That level was major support in the second half of 2020 and the first half of 2022. Take a second and note just how strong of a reaction we got from this level.
If EA stock retests this level, it will be interesting to see what kind of reaction it draws from it. It goes without saying that the 61.8% retracement also comes into play near $110.
If Electronic Arts stock bounces from this zone, bulls will want to see it regain prior uptrend support, then make a run toward $125.
If $110 fails as support, it opens the door down to $100. Not only is this level psychologically relevant, but it also marks the 78.6% retracement.
With current support giving way, the bottom line is simple: Keep an eye on $110.
