Breaking Down and Away from the Highs in Electronic Arts EA

Jul 23, 2014: 2:19 PM CST

Electronic Arts (EA) surprised to the upside yesterday on earnings but failed to impress traders with tepid future guidance and we’re seeing a sharp gap-down and sell-off from the recent highs.

Let’s take a look at this strong trending stock, note two prior ‘pullback’ scenarios, and chart the probabilities of what to plan now.

Here’s the daily chart and gap-down against the high:

I first wanted to highlight two similar “divergences into the highs” situations ahead of short-term pullbacks or retracements against the strong uptrend in motion.

We’re charting the odds for a third repeat of this “divergence into resistance” pattern seen from November 2013 and March 2014.

Should history repeat, we could see a pullback or retracement for EA shares in the near future.

Both times, price broke under the rising 50 day EMA which is currently trading at the $35.00 per share level.

Keep your eye on the spike-low and 50 day EMA confluence near $35.00 per share for any additional continuation of the pullback already in motion.

Of course, we have to plan alternate thesis – or in this case – Pro-Trend bullish outcomes for an immediate support and impulse to new highs.

For the moment, odds (at least from a charting standpoint) seem to favor caution and waiting to put on a new buy/long position after this potential sell-swing or retracement finds a support target.

Let’s take a moment to learn a quick educational lesson from the Hourly Chart and current outcome:

EA Shares formed a nice parabolic arc trendline structure through July that ended with a breakthrough of the rising trendline on July 21st.

Note the spikes in red-sell (bearish) volume ahead of today’s gap-down from divergent resistance.

It can be risky buying shares into new highs – usually divergences in an overextended market serve as decent “take profits” signals while breakthroughs of rising-arc trendlines like these also offer “take profit” signals along with very aggressive “sell short” brief time-horizon trades.

If you’d like to learn more about similar “Arc Trendline” patterns,  see any number of prior posts on this concept of “Parabolic/Arc Trendlines:”

“Charting the Long-Term Parabolic Arc Trendline in the S&P 500 since 2009”

“Strength in WYNN and the Parabolic Price Arc

“March Crude Oil Structure and One of My Favorite (Arc) Patterns”

“March Check-up on (Intraday Arc Trendline) Internals at the Highs”

Arc Trendline on the Weekly US Dollar Index (still in motion)”

Key Inflection (and Arc Trendline Lesson) in Apple AAPL” (great lesson)

The Dominant “Arc” Trendlines to Watch this Week in Gold

Intraday Rounded Arc Playing out (SP500)

Lesson in Trading Intraday Arc Trendline Breaks/Reversals

Gold Trapped Between Rounded Arc Support and Horizontal Resistance

Log-View of the Arc Trendlines on the US Market Indexes (April 2010 ahead of “Flash Crash”)

Updated Arc Patterns on the US Indexes (again, ahead of “Flash Crash”)

Sell-off in Crude Oil from Intraday Rounded Reversal (May 10, 2010)

TLT “Arcs” Down into Support

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Corey Rosenbloom, CMT
Afraid to Trade.com

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2 Comments

2 Responses to “Breaking Down and Away from the Highs in Electronic Arts EA”

  1. Interesting Arc Pattern Forming Buy Signal in Harley Davidson HOG | Afraid to Trade.com Blog Says:

    […] the way, we’re seeing a successful outcome of the “Arc Trendline” Pattern I highlighted in Electronic Arts (EA) earlier in the week – check out that example as […]

  2. Midday Market Update and Stock Scanning for July 29 | Afraid to Trade.com Blog Says:

    […] a look at a recent update in Electronic Arts (EA) I wrote that highlighted a likely sell signal (which we’re seeing play out […]