Activision Blizzard Stock Ripe for a Bullish Options Trade

ATVI tends to outperform in July

Jun 29, 2018 at 10:43 AM
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Activision Blizzard, Inc. (NASDAQ:ATVI) came within a chip-shot of notching a record high earlier this month, extending a mid-May bounce off its 200-day moving average. The shares have more recently consolidated near another trendline that's had bullish implications in the past, suggesting ATVI could be headed on its next leg higher.

Specifically, the pullback has the shares trading near their 40-day moving average, which has been ushering ATVI higher since early May. According to Schaeffer's Senior Quantitative Analyst Rocky White, the last 13 times the equity has come within one standard deviation of this trendline after a lengthy stint above it have resulted in an average one-month gain of 3.93%, with 77% of those returns positive.

atvi stock price chart on june 29

At last check, ATVI stock was trading up 1.5% at $77.17, so another move of this magnitude would put the shares above $80 -- and north of their March 12 all-time peak of $79.63. Increasing the equity's chances of a near-term rally are the potential for seasonal tailwinds. Activision Blizzard has been one of the best stocks to own in July over the past 10 years, averaging a monthly return of 5.28%, and boasting a 90% win rate.

There's certainly room for analysts to upwardly revise their ratings on a stock that's already up 21.8% year-to-date. While five of the 22 covering brokerages still maintain a tepid "hold" rating on ATVI, the average 12-month price target of $77.62 stands in line with current levels. In fact, today's gains are possibly the result of an earlier price-target hike to $88 from $76 from UBS.

Those wanting to bet on more upside for Activision Blizzard stock may want to consider options. The equity's Schaeffer's Volatility Index (SVI) of 27% ranks in the 11th annual percentile, indicating short-term options are pricing in relatively low volatility expectations -- a boon to potential premium buyers.

 

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