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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 per cent on Monday after losing 4 per cent 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.

Volatility in Nintendo shares has jumped since April as investors try to gauge whether the company can maintain the sales momentum of its popular Switch game console into a second year. Last week’s unveiling of new Pokemon games sent shares surging 6.1 per cent over Wednesday and Thursday, only to drop sharply over the following two days. Volume was heavy on Monday, with Nintendo’s alone accounting for about 7 percent of Tokyo’s $22-billion in stock turnover.

Rumors that the world’s most popular game, Fortnite, will be unveiled for the Switch at E3 have already been digested by the market, analysts said. With Pokemon announced last week and the highly-anticipated Super Smash Bros. sequel already confirmed in March, that left investors anticipating Nintendo would not have additional news for its E3 broadcast next week.

“The market is probably selling shares ahead of E3 because people are concerned Nintendo doesn’t have a pipeline that will wow investors to a point where analysts will have to raise earnings targets again,” said Amir Anvarzadeh, a senior strategist at Asymmetric Advisors in Singapore, who said he got three calls from investors about Nintendo this morning. “The other question is whether their network infrastructure is really ready to cater to online gaming.”

Over the weekend, Nintendo released a free demo of the upcoming title Mario Tennis Aces. Frustrated gamers took to social media to gripe that the game was unplayable due to connection issues, including delays. That followed prior complaints about Splatoon 2, an online-focused game which some players said made it unnecessarily difficult to play together with friends or limiting which game modes can be accessed at certain hours.

Nintendo is planning to launch its paid online network in September, with Morgan Stanley MUFG Securities Co. analysts estimating the service will bring in 19.2 billion yen ($175 million) in operating profit for the fiscal year ending March 2020. But a bumpy roll-out could put those expectations in jeopardy, potentially forcing Nintendo to invest more heavily into beefing up the infrastructure.

“They’re years and years behind on the network business,” said Anvarzadeh. “That doesn’t mean they can’t catch up, but Sony spent billions on fortifying the PlayStation Network expansion.”

Nintendo declined to comment on Fortnite and player complaints about connection issues in Mario Tennis Aces.

Wall Street analysts have been unwavering in their support for Nintendo through the sell-off. The average target price is 58,944 yen, according to estimates compiled by Bloomberg. That is about 45 per cent above today’s actual price, the biggest gap since November 2008.

Short-selling interest was at 1.04 per cent of outstanding shares on Monday, below a recent high of 1.2 per cent reached in early April, according to data from Markit Securities. That was also well below a peak of about 4-per-cent hit in July 2016 when shares doubled in two weeks after Pokemon Go was released.

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