Why These 2 Video Game Stocks May Be Poised to Pop

Video game makers Electronic Arts Inc. (NASDAQ:EA) and Activision Blizzard, Inc. (NASDAQ:ATVI) have put up phenomenal gains, but their runs may not be over

Dec 1, 2015 at 2:09 PM
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Who said video games were just for kids? Game makers Electronic Arts Inc. (NASDAQ:EA) and Activision Blizzard, Inc. (NASDAQ:ATVI) have been technical monsters, coming in as two of the best performing S&P 500 Index (SPX) stocks in 2015. With the holiday season picking up, let's take a look at these two entertainment giants to see why their technical dominance may not be over with.  

Starting with EA, the shares have picked up 46.6% in 2015 to trade at $68.95, gaining 1.7% today alone. Furthermore, the stock touched a record high of $76.92 at the end of October following a strong quarterly showing -- and a few weeks before the release of the company's highly anticipated "Star Wars" game. Interestingly, there's still plenty of pessimism surrounding the equity. 

In the options pits, EA has a 10-day put/call volume ratio of 1.30 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading outranks 82% of all others from the past year, meaning there's been a greater-than-usual appetite for put buying recently. 

In a similar vein, the security's Schaeffer's put/call open interest ratio (SOIR) stands at 1.21, which tops 73% of comparable marks from the past 12 months. Put differently, short-term traders are unusually put-skewed at the moment. 

If that wasn't enough, short interest on Electronic Arts Inc. remains considerable, despite dropping 7.1% during the two most recent reporting periods. In fact, it would take short sellers over a week to repurchase their bets, at normal daily volumes. If EA can shake bears loose inside and/or outside of the options pits, it could fuel more gains for the shares. 

Looking at ATVI, it too has been charging up the charts. Just today, the shares hit an all-time high of $38.76, and were last seen 2.4% higher at $38.56. Over the past three months, the stock has beat out the SPX by nearly 24 percentage points. 

Still, there's been a peculiar put bias in the equity's options arena, compared to what's typically seen. ATVI's 50-day put/call volume ratio at the ISE, CBOE, and PHLX stands at 0.42 -- higher than 84% of all readings from the past year. This also coincides with the stock's SOIR of 0.60, which tops 78% of readings, going back 52 weeks. Long story short, ATVI could be on the way to higher highs, if bears start hitting the exits. 

Taking a look at one other area for Activision Blizzard, Inc., we see the security could be overdue for price-target hikes. Specifically, the stock's average 12-month price target checks in at $41.46, or just 7.5% above current levels, even as the shares have been knocking out new highs. If analysts upwardly revise their price targets on ATVI, it'll provide yet one more catalyst for extended gains. 

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