Playing Games with Activision Blizzard or Take Two Interactive
- Posted by Greg Harmon
- on January 11th, 2011
Activision Blizzard (ticker: ATVI) and Take Two Interactive (ticker: TTWO) have been on my radar since before Christmas. Not because I am a gamer but because of their charts. Below is the chart for ATVI.
This chart shows the failed break out of the long wedge in late December now trying to find support at the 50 day Simple Moving Average. It held there Monday but tested lower today before resting near it again at the close. The other indicators on this chart suggest that there is more downside to come. The Relative Strength Index (RSI) has been heading down and after breaking below 50 does not show any sign of reversing. A test of 30 on the RSI looks likely based on the historical price movement. Additionally the Moving Average Convergence Divergence (MACD) has been worsening. On its own ATVI looks like a good short to the 100 day SMA at 11.53 or the 200 day SMA at 11.37 at least.
Now look at the chart of TTWO below.
TTWO gapped up in mid December with a long shadowed shooting star and has since filled that gap. It has recently set a good base and is moving higher. Adding to the bullish case the RSI is heading higher and pointing up and the MACD has been improving and is now showing a cross higher. From a symmetry perspective TTWO has now put in its 4th consecutive ‘U’ shaped pullback and move up. If the symmetry holds it would suggest at target of 15.
But it gets better. Below is the ratio chart of TTWO against ATVI.
This ratio shows an ascending triangle pattern with an approach to the top rail. At the top rail of ascending triangles there is a decision point. Will the rail hold and reject the price or ratio lower or will it break through. Waiting for a break of that rail before entering a pairs trade of long TTWO and short ATVI, or confirmed support before the reverse trade, would be prudent. But the analysis above of each individual stock can also be considered to catch an edge. The technicals of both stocks suggest that a break through will occur. If this does happen a the pattern would suggest a move upwards to 1.5 or more. There is some resistance on the chart at 1.36, which compares nicely with the ratio 1.32 obtained using the target prices of each stock above (15/11.37)
Trade Idea: Long TTWO against Short ATVI on the move above the top rail, looking for a move to 1.36 in the ratio. Use the 1.07 just below the top rail as a stop.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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