A few weeks ago I alerted you to this stock because it had ‘smart money’ buyers, a “bad news good action V bottom” pattern, and a bullish base.
Yesterday, the breakout that I have been looking for began.
Activision Blizzard (ATVI) broke out of a bullish base yesterday on news of a partnership with Tencent, which will bring its popular game, Call of Duty: Mobile, to the U.S.
The news is positive, but the reaction of the stock is most likely due to its technical condition.
As I explained a on February 20th in this column, ATVI had several signs that it had bottomed and it was just waiting for a catalyst to push it out of its base and over its 50-day moving average.
The breakout entry was over $46.60 and based on the current pattern a reasonable buy zone would now be from $45.50 – $47.50.
The tightest stop should be under $44.50, but it you’re more inclined to give it more room, under 43 would be another good option.
Here are the highlights of why this base breakout is likely a long-term bottom.
- Ray Dalio’s Bridgewater Associates fund bought 230,000 shares of this stock in the fourth quarter of 2018.
On Feb 12th when ATVI announced earnings that beat current estimates, but at the same time the company lowered their guidance for revenues and earnings in Q1 and Fiscal Year ’19.
Wall Street hates lower guidance, and usually pushes stock prices lower when this happens. However, the market responded with ‘good action.’ The stock rallied sharply over the next few days.
- It’s recent 52-week low occurred with the biggest volume down day in years.
The 200-day moving average is currently around $65 so even if ATVI were to simply recover back to that average over the next several months then 60 would be a realistic technical target.
That’s a 30% gain on the stock, and potentially more if options are employed.
Rick Nartarian, Chief Investment Officer
The American Investor Daily