ATVI Stock: One Last Hurdle
Activision Blizzard, Inc. (NASDAQ:ATVI) stock has been lagging, showing real relative weakness when compared to the general market indices. These markets have forged higher following the presidential election and broken many records in the process. Media outlets continue to gush over these lofty levels, while ATVI stock has yet to show up to this party.
I have some good news, as it seems like Activision is making a valiant effort at regaining some of its footing, and there is a chance it will be making it to this party. I stipulate the word chance because there are conflicting indicators that may prove too daunting for ATVI stock to overcome.
The following ATVI stock chart illustrates the price pattern that suggests Activision stock has regained its footing and can stage an advance.
For the past four years, there has been an ascending channel that has defined the advance in ATVI stock. This ascending channel contains two upward-sloping parallel lines that define support and resistance. The share price will effectively oscillate between these two trend lines for as long as the trend permits. This trend will continue to suggest a bullish advance for as long as Activision stock is contained within these levels of support and resistance.
The ascending channel also serves to define risk. If Activision stock ever closes below the bottom of this channel, I will have all the reasons I need to believe that the overall bullish trend in ATVI stock has concluded.
Chart courtesy of StockCharts.com
Last month, in December, Activision stock tested support outlined by the ascending channel. This test was deemed a success because ATVI stock did not fall through support and currently remains above it. This price action suggests that Activision stock can now stage an advance.
The signal lines of the moving average convergence/divergence (MACD) indicator in the lower panel are converging. A bullish cross is possible in the weeks ahead and would suggest that bullish momentum is set to dominate the trading action. This would support the notion that ATVI stock is set to stage an advance.
The following Activision stock chart illustrates a conflicting indicator that might cause ATVI stock to miss the party.
Chart courtesy of StockCharts.com
In order for ATVI stock to test support outlined by the ascending channel, price had to cross below the 200-day moving average. This moving average is used as the dividing line between stocks trading with a bullish bias versus stocks trading with a bearish bias. Trading above the 200-day moving average is bullish, and trading below it is bearish.
There have been a couple of attempts to advance above the 200-day moving averages, but none have had any success. I believe that this moving average is the hurdle Activision stock needs to overcome in order to stage an advance.
The advance off the test of support has been orderly and constructive. Orderly and constructive advances contain impulse waves that advance price, and consolidation waves that unwind any overbought conditions and set up the next impulse wave. This bullish price action continues to suggest that a break above the 200-day moving average is a real possibility.
In terms of defining risk, a break above the 200-day moving average ($39.70) would suggest that ATVI stock is set to resume its advance, and a break below $38.00 would suggest that support outlined by the ascending channel would be put to the test once again.
Bottom Line on ATVI Stock
The lackluster performance that ATVI stock experienced following the United States Presidential elections may soon be a thing of the past. If Activision stock can regain its footing and leap above the last hurdle that is containing it, a price advance is set commence.