World Wrestling, Inc. (WWE) shares initially rallied in New York following overnight news that the company’s Wrestlemania 32 event was a success. WWE broke two key benchmarks, record attendance and gross figures for a single event. Shares initially rallied over 5% but that ended after the company’s press release which contained disappointing guidance. While the company did report a record 1.82M subscribers for their digital service, they only affirmed their Q1 adjusted OIBDA guidance at $19M or higher. As of April 4th, domestic and international paid subscribers only reached 1.45M.
Price action on the WWE daily chart shows that the bearish reversal started after priced peaked following the press release which contained guidance and subscriber figures. After rallying almost 9%, shares got slammed and finished the day 4% lower around the $16.59 area. The chart above shows that price may have formed a bullish ABCD pattern at the $15.88 low. Point D is targeted with the 161.8% Fibonacci expansion level of the B to C leg. If the reversal is short-lived and bearish momentum continues, we could see price target the 2016 low of $14.20.
If this bullish reversal pattern is able to recapture the 200-day SMA, which currently trades around the $17.82 level, we could see further upside target the $19.00 handle.
The Trade: Sell WWE at $16.75, with a stop loss at $17.25 and a take profit at $14.75. The Risk/Reward Ratio is 1:4