Why Zynga's Earnings Dip Is Potentially A Great Opportunity For Bulls

Zynga Inc. ZNGA shares plummeted lower Friday morning after the company reported worse-than-expected sales results for the second quarter. The company also reported it plans to buy StarLark for $525 million in cash and stock.

Zynga was down 18.22% at $7.99 at last check Friday.

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Zynga Daily Chart Analysis

• Shares took a large dip following earnings, the price looks to have bounced off an old support level.
• The stock is trading below both the 50-day moving average (green) and the 200-day moving average (blue), indicating sentiment in the stock has been bearish.
• Each of these moving averages may hold as a possible area of resistance in the future.
• The $7.75 level was once resistance before the stock crossed above it, then the level turned into support and fell near this price Friday. The $11 has been at resistance in the past.
• The Relative Strength Index (RSI) dumped lower and now sits at 14 on the indicator. This means there was a very large amount of sellers getting rid of shares.

What’s Next For Zynga?

Bullish traders would like to see the stock bounce at the support level and hold above $7.75. If the stock can hold above $7.75 it could start to form higher lows and head toward the $11 resistance.

Bears would like to see the stock fall below the support level and begin to hold it as resistance. If this were to happen the stock could be ready to see another downward push.

Photo: Courtesy Zynga