In our Nov. 22 review of Activision Blizzard (ATVI) we wrote that, "the share price of ATVI is weak and the charts are pointed lower. The pace of the decline may be slowing soon so traders should be alert to the possibility of an upside pop or rebound from oversold readings. We might see buyers return if ATVI gets into the $51-$47 area but it is too soon to tell."
Well, now that Microsoft ( MSFT) has entered the picture with a $95 cash offer we need to check the charts again. With ATVI trading around $82 we have some room to wiggle.
In the daily Japanese candlestick chart of ATVI, below, we can see some subtle bullish clues but only with hindsight. Notice the incredible string of white real bodies (bullish candles) during December. Nearly every single day we see that prices closed above the open. Bulls were in charge but they did not tip their hand with increased volume, although the On-Balance-Volume (OBV) line does show a rise.
The Moving Average Convergence Divergence (MACD) oscillator crosses to the upside in early December for a cover shorts buy signal. An outright buy signal came at the end of December when this oscillator crossed above the zero line.
In this weekly Japanese candlestick chart of ATVI, below, we can see with hindsight a bottom reversal pattern in late November and early December.
In this daily Point and Figure chart of ATVI, below, we can see that prices reached their $87 price target.
Bottom-line strategy: ATVI is off its best level of the day. Prices may be weak because of the selling in the broader market or some traders may take profits because they are not completely confident that the Microsoft deal will go through. My gut says that taking profits looks like a good idea right now.
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