Betting On The Technicals In Activision Blizzard
Dragonfly Capital | Oct 07, 2014 01:31AM ET
The majority of stock market analysts and money managers look at fundamental data to determine if the want to buy, sell or hold a stock. But Technical Analysis can give a better or more complete picture on actual real-time valuation. One example of this can be seen in Activision Blizzard (NASDAQ:ATVI).
When Activision Blizzard reached a peak at 24 in September it was trading at a PE of about 28.4, slightly above the industry average at 21, but no where near the 93 of its competitor Electronic Arts at a PE of 93. Yet the stock pulled back hard. The chart above shows the price action over the last 2 years and offers a simple technical perspective of why it pulled back. The price had touched the top of a rising channel. In sentiment terms this means it had reached a point above the rising trend where owners had been nervous enough to sell it in the past, and they did so again. And what has happened since? The price fell back to the bottom of that channel. The PE is now only 24.67, still above the average, but the technical view says it is time to buy. That rising channel has been support for almost 2 years and the 200 day SMA has been on top of it for most of that time.
If you want to keep it simple that is enough. But the full technical picture shows the momentum indicator RSI in oversold territory and the Japanese candlesticks over the last 3 days confirm a reversal.
Disclaimer: 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.
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