Trading Strategies For Activision Blizzard Stock Before And After Q4 Earnings

Zinger Key Points
  • Analysts, on average, estimate Activision Blizzard will report earnings of $1.51 per share on revenues of $3.17 billion.
  • The stock confirmed a new downtrend on Monday by printing a lower low.

Activision Blizzard, Inc ATVI gapped down about 2% lower on Monday and continued to decline intraday. The stock is headed into its fourth-quarter earnings print, scheduled for Monday after the market close.

When Activision Blizzard printed a third-quarter revenue beat on Nov. 7, the stock popped about 1% higher the following day before rallying almost 7% over the 11 trading days that followed.

For the third quarter, Activision Blizzard reported adjusted earnings of 68 cents per share, which beat the consensus estimate of 50 cents per share. The company reported revenues of $1.83 billion, which beat the $1.69-billion estimate.

For the fourth quarter, analysts, on average, estimate Activision Blizzard will report earnings of $1.51 per share on revenues of $3.17 billion.

Traders and investors are awaiting commentary from the Competitions and Markets Authority (CMA) about Activision Blizzard’s potential merger with Microsoft Inc MSFT. Microsoft has faced scrutiny over the deal from regulators in the U.S. and overseas and the big-tech giant expects the CMA to block the merger.

From a technical analysis perspective, Activision’s stock looks bearish heading into the event, having confirmed a new downtrend on Monday by printing a lower low.

It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

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The Activision Chart: On Feb. 2, Activision printed a lower high when the stock was unable to remain above the 200-day simple moving average, which negated Activision’s uptrend. On Monday, Activision confirmed a new downtrend is in the cards.

  • If the stock closes the trading day near its low-of-day price, Activision will print a bearish kicker candlestick, which could indicate lower prices will come on Tuesday. If the stock closes the session with a significant lower wick, it could indicate the next low has occurred and Activision will trade higher over the next few days.
  • The second most likely scenario is that Activision begins to trade sideways to consolidate Monday’s sharp decline. If that happens, the stock is likely to print an inside bar pattern. Traders can then watch for a break up or down from Monday’s trading range to gauge future direction.
  • A bounce is likely to come over the next few days because Activision’s relative strength index (RSI) is measuring in at about 33%. When a stock’s RSI nears or reaches the 30% level, it becomes oversold, which can be a buy signal for technical traders.
  • Activision has resistance above at $72.20 and $74.59 and support below at $67.77 and $64.53.

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