Earlier we saw that Electronic Arts Inc (ERTS) was in the news and a check of the stock shows it is hitting a new annual low today. One potential problem area here for a rebound could be optimism from analysts.

According to Zacks, 9 of 13 analysts (69 percent) currently rank the stock with a "buy" rating. Three months ago, 50 percent of the ratings were buys. With that in mind, lets look at the stock's performance.

This daily view below shows the action since April. What stands out is the decline we have seen over the last two months. Pairing this info with the data above suggests that the Street has actually become more bullish as the stock has dropped. Perhaps some are seeing Electronic Arts as a value play or looking for a quick bounce?

Another point to note here is the divergent action in Relative Strength Index (RSI). As the green trend lines highlight, each new low in the stock has been met with a higher low in the RSI. This is called a bullish divergence and the interpretation is that selling pressure is losing power.

This leaves us with a mixed picture. The positives would be a short-term divergence. The negative include heavy optimism from the Street and the gap to new lows on lackluster fundamental news. It is the later that I think should be watched closely. Analysts have been becoming more bullish but the question is whether they were expecting the uninspiring news. If not, some may be looking to sell into any rallies which could lead to a steady supply of overhanging stock. I think that would trump the bullish divergence.

Chart Courtesy of Thomson Financial