Nintendo Co. suffered its biggest two-day drop in 18 months, befuddling analysts and sending investors scrambling to explain the sell off.
Shares tumbled 6.3 percent on Monday after losing 4 percent on Friday, the largest two-day decline since December 2016. The drop left the stock at its lowest level since September and at its biggest discount versus Wall Street targets in nearly a decade.
Analysts reported getting dozens of inquiries on Monday from hedge funds and investors eager to understand the sell off. Theories ranged from falling expectations for positive surprises at next week’s Electronic Entertainment Expo conference, known as E3, to troubles with Nintendo’s online games. Many also pointed to quantitative traders selling on weakening momentum, although short-interest remained low by historic standards.
“What is shocking is that recently there has been a lot of good news related to Nintendo,” Jefferies Group analyst Atul Goyal wrote in a report to clients, blaming the drop on traders who rely on technical chart analysis to make investment decisions. “Nevertheless, if chartists are giving a diametrically opposite view, we take this as an opportunity to reassess and review.”
Among the key technical signals, the stock fell through its 200-day moving average last month. That’s the first time it has traded below that indicator in about two years.
