Buy Calls on These 2 Video Game Stocks Right Now

ATVI and EA stocks both tend to bounce off their 40-day moving average

Managing Editor
Sep 21, 2017 at 3:36 PM
facebook X logo linkedin


Video game titans Activision Blizzard, Inc. (NASDAQ:ATVI) and Electronic Arts Inc. (NASDAQ:EA) could be subject to extra investor attention next week. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, the stocks have been two of the biggest gainers on the S&P 500 Index (SPX) in the past six months -- and could be ripe for increased buying activity as the third quarter comes to an end next Friday, due to what's known as "window dressing."

Plus, both ATVI and EA are trading near historically bullish trendlines. Below, we'll take a closer look at both stocks, and explain why now may be a good time to buy short-term calls on the the video game names.

ATVI Stock Could Be Poised for a Big Bounce

ATVI shares closed higher yesterday on news Comcast bought the Philadelphia team in Activision's Overwatch esports league. However, ATVI stock is down 1% today to trade at $64.38.

Nevertheless, the shares remain up 77.7% year-to-date, and considering the stock is trading within one standard deviation of its 40-day moving average after a lengthy stay north of here, more gains could be on the horizon. According to White, in the 13 previous times this signal has flashed the past three years, ATVI shares have yielded positive one-month returns 83% of the time, averaging a gain of 4.67%.

ATVI's short-term promise is further emboldened by its historical performance in the month of September. The stock is one of the best stocks to own in September, averaging a 4.2% monthly gain over the past 23 years, and finishing positive 65% of the time.

The good news for options traders is that now is an attractive time to buy premium on short-term ATVI options, considering they're pricing in relatively low volatility expectations at the moment. The stock's Schaeffer's Volatility Index (SVI) of 23% ranks in the 10th annual percentile.

EA Stock Looks To Break Out Again

Electronic Arts stock is down 1.9% to trade at $118.06, and is currently on track to snap a four-day winning streak. It's been an otherwise solid year for EA stock, tacking on 50% so far in 2017, and touching a new record high of $122.79 on Aug. 31.

Since hitting this milestone, EA pulled back to its 40-day moving average, which has been a bullish sign for the shares. According to White, in the 13 previous pullbacks to this trendline over the past three years have yielded positive one-month returns 83% of the time, with an average gain of 6.35% for EA shares.

In the options pits, there has been an overwhelming preference for long puts over calls lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 1.11 for EA, which ranks in the 75th percentile of its annual range. A quick bounce for EA could spark an exodus of option bears, which may create tailwinds for the stock.

Options traders looking to bet on EA's short-term trajectory can do so at a relative bargain, too. The stock's SVI of 22% ranks in the 20th percentile of its annual range.
 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI