The secular story remains a good one, but it’s time for bears to answer the “call of duty” in Activision (NASDAQ:ATVI) by shorting ATVI stock with a solid technical line of defense backing the bearish play.
Let me explain.
It dwarfs Hollywood and it’s only going to get bigger in the coming years. I’m referring to the gaming entertainment industry and one of its top generals Activision. In 2017, the market had revenues in excess of $36 billion compared to the movie industry’s just north of $11 billion total. And it will get much bigger, and it goes without saying ATVI stock is going to benefit from this trend.
Activision stock is in position to benefit from new and exciting markets like eSports, mobile and first-person shooter games are seeing huge interest. What’s more, the demographic base playing these games is ballooning with a major and inclusive shift away from the not-entirely-correct, but stereotypical nerdy teenage boy market.
And just this week, more evidence of these trends for ATVI stock has been backed in spades.
Activision released its latest version of the wildly popular first-shooter Call to Duty franchise, titled Black Ops 4, to record-breaking numbers. The game has seen more than $500 million in global sales in its first three days since being introduced and established a new one-day record for digital full game sales on PlayStation.
Supportive ammo also came in the form of the total number of players and hours played, which is up year-over-year. Furthermore, Black Op 4’s opening weekend launch was the most viewed on Twitch in the history of Call to Duty. Go ATVI stock, right?
Not so fast … unless you’re willing to play the game and suit up as a bear.
ATVI Stock Weekly Chart
A quick look at the weekly chart of Activision stock shows a fairly classic-looking uptrend channel over the past couple years as still being intact and a trend in motion. So why am I bearish right now?
As recently as late August, I was bullish on ATVI. And a still “in play” November spread has done spectacular. But during that period, the quality of the trend has deteriorated. A complete breakdown by peer Electronic Arts (NASDAQ:EA) during this period may be serving as an early warning of an imminent and larger correction in Activision and perhaps a full-blown bear market.
The technical deterioration specific to ATVI stock is denoted by the “base-on-base failure” on ATVI stock’s chart and which followed a failed cup-with-handle base. With stochastics having also largely worked hand-in-hand with the weak pattern action and following a prior and much tighter uptrend, an opportunity for bears to launch and profit from a short stock assault on Activision is here.
For bears willing to lock and load with a short stock position, today’s recommendation would be to short shares below the weekly hammer candlestick low of $73.25. Breaking the bullish candlestick should serve as the technical straw, which ultimately breaks the back of ATVI stock bulls.
Given this appears to be setting up in Thursday’s premarket, the other suggestion would be to wait for a stronger intraday shorting opportunity as a counter-move bounce is likely. Following a short initiation, setting a stop-loss above this week’s high of $78.98 looks like a good plan of attack while looking to minimize possible casualties on the battlefield of ATVI stock.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.