Activision Blizzard vs Take Two Interactive: A Pairs Trade Revisited

• Posted by Greg Harmon
• on April 18th, 2011

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 1.07 just below the top rail as a stop.

I put out this pairs trade recommendation on January 11, 2011 (link below). Several weeks later as it hit the target I recommended taking it off, with hindsight a bit prematurely. A good trade but should have let the winner run. But that is the subject of another post. Since then the ratio has been in a bull flag. It is becoming interesting again now for several reasons.

First, the long component Take Two Interactive (ticker: $TTWO) has a great long set up as described in my Top Trade Ideas last night. In a bull flag, if it can break the flag higher over 15.90 then it has a target of 20.

Second, the short component Activision Blizzard (ticker: $ATVI) does not look as enticing. It has some positive aspects with a rising RSI and positive MACD, but there are many levels of resistance that it must get through before it can run dramatically.

Finally, the technicals of the ratio itself look positive. From the chart below the SMA’s are all rising, the RSI has held a second time and is moving higher and the MACD is improving and close to crossing higher. A break out by TTWO would create a break of the bull flag higher.

New Trade Idea: Long TTWO against Short ATVI on the move above the 50 day SMA, looking for a measured move to 1.80 in the ratio. Use 1.33, a new low, as a stop.

Playing Games with Activision Blizzard or Take Two Interactive

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