Activision Blizzard, Inc.: ATVI Stock Set to Continue Flying High

ATVI StockATVI Stock: Cruising Higher

Activision Blizzard, Inc. (NASDAQ:ATVI) stock has not only served as a great investment, but it is also a great example to use to showcase the art of technical analysis.

I use charts to set up investment strategies and my methodology begins with picking stocks that adhere best to technical rules. If a prospective investment lacks what I am looking for, because the pattern is too messy or sporadic, I will just cast that ticker aside and move on to the next potential investment. ATVI stock is a prime example of the type of investments I can only hope to come across.

My strategies call for systematic placement of entry and exit points, and the price chart is the perfect tool to execute such a strategy. There are numerous benefits to my strategy but nothing as beneficial as removing my emotional biases from my decision making.

I am bullish on Activision Blizzard stock and this bias was strictly based on the price chart of ATVI stock.

The following ATVI chart illustrates the pattern that first piqued my interest in Activision Blizzard stock.

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Chart courtesy of StockCharts.com

The formation highlighted in pink is a bullish setup pattern known to traders as a cup-and-handle formation. Traders use these setup patterns to identify continuation patterns that reaffirm the predominant trend. This pattern executed when ATVI stock price closed above the horizontal resistance level at $39.50.

Aside from confirming the direction of trading, this pattern provides a price target I can use as guide for a potential exit if this level is reached. The projected price is $51.00, and it is computed by projecting the depth of the cup above the horizontal resistance level.

The following ATVI stock chart illustrates how a momentum indicator supports the bullish premise.

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Chart courtesy of StockCharts.com

In March 2015, ATVI stock generated a golden cross. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. I use this signal to confirm that a bull market is on the horizon. I found it wise to always trade in the direction of this signal, thus a long or neutral position is warranted. Ignoring this signal and trading against it has proved to be very foolish and costly.

In April 2016, ATVI stock generated a death cross, but that signal was quickly averted. Averted signals are not to be ignored, as they have indeed become a favorite of mine. Averted signals are extremely powerful, and this is due to traders and speculators front-running a signal only to see it fail. These individuals must then quickly reverse the trade, and this process adds further fuel to the trend and has a tendency to accelerate the prevailing trend.

The following chart illustrates the orderly channel that ATVI stock trades within.

atvi3

Chart courtesy of StockCharts.com

There are two parallel lines that define this trend. The pattern is known as an ascending channel. An ascending channel has two trend lines that define the upper and lower bounds. The share price oscillates between these two lines for as long as the trend permits. Activision Blizzard stock has only only briefly tested the bottom of this channel, but each and every time it was touched, the trend quickly reversed and ATVI stock proceeded to trade higher until the top of the channel was hit.

Activision Blizzard stock hit the bottom of this channel in February 2016, and I can only assume based on the previous trend that this position will continue to trend higher until the upper bound of the channel is hit. The cup-and-handle pattern serves to reinforce this premise. The slope of this channel is positive, and the longer it takes to hit the upper parallel line, the higher the target price is.

The ascending channel also serves to define risk. If Activision Blizzard stock trades below the bottom of this channel, I will have reason to believe that the overall bullish trend in ATVI stock has been terminated.

The Bottom Line on Activision Blizzard Stock

I am bullish on Activision Blizzard stock and I have reason to believe that, based on the charts, the trend toward higher prices has further room to run. My bias will remain bullish on ATVI stock for as long as the charts warrant holding such a bias. If the trend changes, so too will my bias.