After a good amount of research over the weekend, the short side of gaming companies has piqued my interest, including Take Two (TTWO), Electronic Arts (EA) and Activision (ATVI).
Each is technically over-extended to the upside. With TTWO, for example RSI and MACD are greatly overdone of the upside, in desperate need of reversal from their runs.
When it comes to EA – RSI, MACD, and Money Flow (FMI) are each over-extended, as well. Each needs to reverse to mean at some point. They can’t just sit where they are for much longer.
Even ATVI is beginning to fail and reverse at 200-day moving average resistance.
The best way to profit from these moves at the moment is by opening a put option with each. If you choose to buy into all three names, buy a basket. Invest equal amounts in all three. For example, if you want to risk $3,000 max, invest $1,000 in each.
Consider buying to open the following puts.
• ATVI February 2015 20 put up to $1.45.
• EA March 2015 40 put up to $3.
• TTWO March 2015 25 put up to $2.
We’ll talk again shortly. Until then, take good care.
Ian L. Cooper
Forgotten Profits