DataTrader: Time to Act on Activision?
Don’t know why shares of Activision Blizzard (ATVI) have been on a tear since August, gaining more than 30%?
Ask your kids.
Activision Blizzard is the maker of some of the most popular, widely-played (and wildly-played) video games on the market. As Activision, the company produced such hits as the Guitar Hero series and Tony Hawk. As Blizzard, the Warcraft series put the company on the mat. And together, Activision Blizzard is responsible for one of the biggest, first-person/third-person shooters in the world: Call of Duty: Modern Warfare, the third installment of which was just released to tremendous fanfare and sales of more than 6 million units.
So do great games make for a great stock?
Again, shares of Activision have made massive gains for shareholders in recent months. After trading largely sideways for more than a year, ATVI broke out to new highs in mid-October and continued higher for almost another month. But after a five-day winning streak that took the stock into overbought territory above the 200-day moving average, traders and investors decided it was time to take profits. Since then, the stock has pulled back for three days in a row. And down more than 2% in trading on Friday, shares of ATVI are back in oversold territory once again.
How have ATVI shares typically fared after retreating to oversold territory? While the past is no perfect guide to the future, previous pullbacks in ATVI have been good opportunities for short term traders looking to buy weakness and sell strength. A two-day pullback in September, shortly after the stock climbed back above its 200-day moving average, resulted in a rally of more than 6% over the next three days. And after closing lower for five out of six trading days in late October, ATVI finished higher one-day, two-days and one week later.
Note also that with ATVI already down three in a row and oversold, any additional weakness in Activision could earn the stock a significant ratings upgrade to “consider buying” status. Such an upgrade would result in the stock’s highest rating in months.
Quantified data and research on stocks like ATVI is available each evening after the market close. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com