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Fan Yang

Electronic Arts (EA) Signals Bearish Correction Ahead

Electronic Arts has been bullish and rallying into all-time-highs. After tagging $150 a share and showing some signals of slowing down, I think there will be a period of consolidation and bearish correction ahead.

EA Daily Chart

(click to enlarge)

Bearish Divergence:
- The daily chart shows a market that is bullish as price continues to stay above the 200- , as well as 100- and 50-day simple moving averages (SMA).
- However, as price tagged $150 a share, which is a new high, the RSI high was lower then the previous. This bearish divergence suggests the rally might be running out of gas for the short to medium-term.
- Furthermore, recent 3-session candlestick combination is one that signals bearish reversal.

Support:
- Because the prevailing trend has been bullish, we should still respect that bullish outlook and therefore limit the bearish outlook.
- I think the area around $136 will likely provide support.
- Furthermore, if the market is indeed still bullish, we should see the RSI hold above 40. Therefore, if the RSI approaches 40, while price is around $136, we should anticipate support, and a possible pivot back to the bullish mode.

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