The market fell yesterday, though it staged a small recovery just before the close. This morning, the market looks primed to head higher, and since I want to keep following the action in the market, I am recommending a bullish position in Activision Blizzard, Inc. (NASDAQ:ATVI).
Stocks look ready to rise at the open today because oil prices are rising for the fifth day in a row. But an increase in oil prices won’t undo the damage done to the economy or companies’ earnings, so choosing the right bullish play for this situation is important.
What Sets ATVI Apart?
Earnings are a bit of a mixed bag right now. Remember that the earnings that companies are reporting now are for the first quarter, and for the first two months of that quarter, it was business as usual for the economy. It wasn’t until March that the economy really started to slow.
So, while some companies are reporting earnings that don’t look so bad, I’m anticipating that they will look much, much worse in the second quarter. It’s hard to say whether that’s been priced into the market already.
ATVI reports earnings after the close today, and investors believe the “stay-at-home” orders across the world mean good things for the company’s first-quarter performance, meaning its prospects are better than other companies’.
ATVI publishes Overwatch, World of Warcraft, Hearthstone and Call of Duty, among others. It has games for all three major consoles, and some of its offerings are mobile games, meaning it doesn’t just cater to “hardcore” gamers.
No matter where players look for a game, ATVI has something to offer, and that’s critical in this market.
Consolidating Above $63
ATVI broke above short-term resistance at $64 in early April. And though it traded below that level last Friday, buyers jumped in to push the stock toward new resistance at around $67-$68.
Daily Chart of Activision Blizzard, Inc. (ATVI) — Chart Source: TradingView
I’m expecting ATVI to perform well enough on earnings to keep its prices above support in the $63-$64 range. Investors may take profits on the positions in the short term, but ATVI, like the other “stay-at-home” stocks, may have a brighter outlook in the short term.
If it does drop, its 200-day moving average could come into play as support, keeping it above the $56 level. With a strike set at $55, the stock will have plenty of wiggle room below that level if investors look to collect.
Sell to open the ATVI May 29th $55 put at about $0.50.
Note: Be sure you are opening the weekly ATVI options that expire on Friday, May 29, 2020.
This is a high-risk trade, so take a small position.
About Naked Put Writes
A naked put write is a bullish position in which you expect the price of the underlying stock to increase.
InvestorPlace advisor Ken Trester also brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.