WWM - Analytics

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    Today’s Trading Edge: Fox shares drop after profit guidance disappoints

    WWM_FOXA_FEB_8_2016.jpg

    21st Century Fox Inc. (FOXA) shares dropped almost 6% in after-hours trade after providing disappointing profit guidance. The company forecasted a drop of $350 million from the strong dollar. Fox also reported second quarter profit of $0.44 a share, lower than analysts’ consensus $0.45. Revenue printed at $7.38 billion, much lower than the same period last year’s reading of $7.42 billion. The conference call that followed the earnings release highlighted the FX headwinds and that the film business is behind expectations.    

    Price action on the FOXA 240-minute chart shows the after-hours drop may found tentative support from a potential ABCD pattern. Point D is targeted with the 161.8% Fibonacci expansion level of the B to C move. If valid, we could see price stabilize ahead of the $23 handle and rebound towards the $24.50 region.

    If price invalidates this temporary rebound pattern and drops below this key Fibonacci level, we could see further pressure target the psychological $20.00 level. A break below that region could open the door for a deeper drop towards the $17.50 zone.      

    The Trade: Sell FOXA at $24.50, with a stop loss at $25.50 and a take profit at $21.50.  The Risk/Reward Ratio is 1:3


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