PreMarket Prep Stock Of The Day: Activision Blizzard

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

The price action of an issue preceding an earnings report can be indicative of the price action following the report. An excellent example of this is the price action in Activision Blizzard Inc. ATVI.

All-Time High Following Q4 Report: Activision Blizzard made its all-time high ($104.53) seven days after its modest fourth-quarter beat that was announced on Feb. 6. As a result of the issue being labeled as a “stay-at-home” play, the reopening of the economy has been a negative for the issue.

After a sharp retreat to $88.13 on March 8, the rebound off that low was capped at $98.43 on April 5 and the resumption of the downtrend continued.

Losing Major Support Ahead Of Report: It seemed buyers were stepping up to the plate ahead of the report, when the issue put in five consecutive lows (April 27-May 3) just above and below the $91 area. When the market cratered off the open on Tuesday, it went along for the ride.

The issue exceeded its former low of the move reaching $87.44 and rebound slightly to close at $88.49. In addition to making a new all-time low, the issue posted its lowest close since Dec. 16 ($88.22)

Q1 Beat And Raised Guidance: After the close on Tuesday, the company reported a GAAP EPS of $0.79, Non-GAAP EPS $0.98 plus Impact of GAAP deferrals $0.14, GAAP Net Sales $2.275B, which beat estimates on both ends. The company also raised guidance.

The company cited strength in the “Call of Duty” and “Candy Crush” for the better than expected report.

After-Hours Price Action: In the thinner after-hours market, Activision Blizzard caught a relentless bid that took the issue all the way to $94.80. That high coincided with four consecutive highs ($94.04-$94.86) from April 22-27.

PreMarket Prep Take: With one glance at the chart, Dennis Dick stated: “I own it my in [my] long-term portfolio and holding, but if I was short-term trading it, I would sell it.” At that time, the issue was trading at the $94 area.

Price Action During Regular Session: Following a higher open, it challenged the after-hours high, but came up just shy peaking at $84.77 and reversed course.

The stock closed up 1.5% on the day at $90.08.