Last week, we talked about consistent performance — either up or down — from a stock after an after earnings report. We played a call on Dr Pepper Snapple Group Inc. (NYSE: DPS) based on its huge moves logged after recent earnings reports.

This week we’re going down that same road, this time with Electronic Arts Inc. (NASDAQ: ERTS).

In this case, however, we’re dealing with a stock that has been putrid after recent reports. Take the past four quarters, for example, during which ERTS beat the consensus earnings estimate three times. The stock dropped after each report, averaging about -7% in just one day. Now that’s consistency. Bad, but consistent.

On the chart, the stock put in a peak in the $16-$17 area this week. This region was the site of chart congestion in May and June, so resistance is hardly a surprise. Heavy call open interest at the $16 strike (nearly 32,000 contracts) could also keep the stock in check.

Sentiment toward ERTS is mixed, with options players favoring calls over puts, and half the covering analysts rating the stock a “buy.” You’d think some of these market experts would know about ERTS’ checkered performance after earnings. Then again, maybe not.

ERTS reports after the close on Tuesday, Aug. 3. Analysts expect a loss of 35 cents per share, which shouldn’t be hard to beat. But recent beats have been followed by price declines.

With technical resistance overhead and sentiment not much of a factor, look for history to repeat itself. Play the ERTS Aug 16 Puts to take advantage of the expected move. 

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