technical analysis EA

Technical analysis of EA

EA, the representative CFD based on Electronic Arts Inc’s shares, has been somewhat more volatile over the last fortnight as the company’s earnings report approaches. While EA has not been an especially strong performer over roughly the last half year compared to other tech and game companies, the outlook is generally positive from fundamentals given expected higher net bookings and high demand for next-generation console games. This technical analysis of EA looks at the four-hour chart ahead of earnings after hours.

EA consistently beat the estimates for its earnings per share (‘EPS’) in 2020 although it posted very slightly negative EPS in the third quarter. The actual ratio of price to earnings (‘PE’) for 2020 was slightly below 30, meaning that EA is not significantly overvalued by this measure. Minimal growth in PE is expected this year to about 32.

Back on the chart, $146.75 seems to be the main resistance in the short term, while the area around $150 – February’s high – is a key resistance above this. Low support might occur around $127.50, the zone of the latest low on this chart.

Technical indicators on EA H4

 

Moving averages are mixed. The 50 SMA from Bands golden crossed the 100 in the middle of last month, but the latter remains below the 200. The price has also recently moved back below the 50 SMA. Both of the 100 and 200 SMAs might provide support over the next few days in the event of a deeper retracement, while a close above the 50 SMA could open the door to more gains.

There is currently no signal of saturation from either Bollinger Bands (50, 0, 2) or the slow stochastic (15, 5, 5). The latter at about 60 is closer to neutral than oversold. Shrinking Bollinger Bands would typically suggest a breakout to come over the next few periods; the direction of this if it occurred would depend on the results tonight.

Price action and Fibonacci

 

Volatility has increased somewhat in May so far, with the gap down from 3-4 May and the gap up from 4-5 May not being closed. Yesterday’s downward engulfing candle should probably not be acted on in the context except in cases of very high risk tolerance.

The main resistance in view from Fibonacci is the 100% daily retracement area, i.e. full retracement of all losses from the middle of February to the middle of March. Before this, the 38.2% area of the daily fan and the 61.8% retracement are likely to be in focus tomorrow.

Technical analysis of EA: summary

 

Electronic Arts Inc is expected to release its earnings report for the first quarter of 2021 today, 11 May, after hours. The consensus EPS is 71c. The nine estimates range from 66c to 77c; three have been revised upward within the last four weeks.

Overall the technical situation for EA appears to be more positive than negative. However, a breakout above the latest highs near $146.75 doesn’t look very likely in the immediate future unless earnings tonight give participants a significant positive surprise.

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