USA Today ran a story recently highlighting 10 S&P stocks with the biggest percentage gains since the last market high. This kind of story is backward looking. "Hey, you would be ahead xx% if you bought these names a year ago." Thanks. Let's look at the charts and indicators of these top-10 picks and see what the future might bring.
Activision Blizzard (ATVI) is No. 6 on the list. (Click here for Part 5 of this series, on Facebook.)
In recent months, ATVI has been rallying back to its 2015 zenith. Can it push through to new, all-time highs, or could it fail and make what technical analysts call a double top formation? Let's take a closer look before we decide.
In this daily chart of ATVI, above, we can see the strong rise in 2015 and then the swift decline that ended in a V bottom in February. This V bottom formation was made without the benefit of a bullish divergence from the momentum indicator. Prices made lower lows in January and February as it cascaded down and the momentum study also made lower lows.
Often as securities trade down to what becomes a low, you see momentum slow down -- like a car approaching an amber traffic light. No slow down for ATVI. Prices fell below the rising, 200-day moving average line and then rallied back above it in March. By April, ATVI was back above both the 50-day and the 200-day averages and both were rising.
The On-Balance-Volume (OBV) line has been neutral in recent months as prices rallied. It would be a stronger chart story, in my opinion, if the OBV line rose like it did in the September to December period. Volume of trading has been better in May and the OBV line is showing more "life" lately, so this could be the clue that bulls on ATVI want to see.
When we look at this weekly chart of ATVI, above, we see all our indicators lined up on the upside. Prices are above the rising, 40-week moving average line. The OBV line is rising on this time frame. The Moving Average Convergence Divergence (MACD) oscillator is in a bullish configuration above the zero line.
Ready. Set. Go! My rule of thumb about possible double tops is that if prices go more than 2% above the prior peak, they are likely to keep going. So if ATVI can close above $41, it is probably going much higher.