Video game publisher and Nasdaq 100 component Activision Blizzard, Inc. (ATVI) rallied to a nine-month high on Tuesday after the successful launch of "World of Warcraft Classic," a reboot of the original game that took the world by storm after the December 2004 release. The often vociferous "World of Warcraft" (WoW) community has complained for years that subsequent expansions have also destroyed its best features, catering to casual players and the "insta-win" crowd.
Free private servers offering pirated versions of the original game sprung up all over the world after the hugely controversial "Cataclysm" release in December 2010, which destroyed the "Classic" world and replaced it with dumbed-down quest and leveling systems. The company went to great lengths trying to shut down the pirates but finally threw in the towel in 2018 when it announced the "Classic" release.
Unfortunately for bulls, this isn't a good time to buy the stock because the long queues reported in the gaming press after Monday's launch will be gone quickly, with the majority of players returning to the "Battle for Azeroth" expansion, which was released in August 2018. Of course, many folks (including the undersigned) who played the original game will return for a long visit, but we're all older now, and content that felt so satisfying 15 years ago may not be as engaging.
ATVI Long-Term Chart (1994 – 2019)
The combined company adopted Activision's long-term chart after the 2008 merger with Blizzard and Vivendi. A modest uptrend stalled at a split-adjusted $1.67 in 1995, marking resistance into a 2001 breakout that reached $4.29 in 2002. It rallied above that level in 2004 and stair-stepped higher into 2008, topping out near $20 at the same time as the merger, and then dropped like a rock during the economic collapse.
Selling pressure eased at a two-year low, yielding a bounce that stalled the low teens in 2009. The stock performed poorly into the next decade, finally breaking out in 2013 and entering a sustained advance that lost steam in the $70s in January 2018. It posted three higher highs into October 2018's all-time high at $84.68 and turned sharply lower into February 2019, hitting a two-year low in the upper $30s. Price action since that time has built a rounded basing pattern that just pierced the 200-month exponential moving average (EMA) after a December breakdown.
The monthly stochastics oscillator entered a buy cycle in March 2019 and just reached the overbought level in a structure that can support at least one more rally wave before the bounce comes to an end. The annual Blizzcon event is scheduled for the first week of November, suggesting a floor under the stock until it announces the eagerly awaited "Diablo 4," successor to the heavily criticized "Diablo 3."
ATVI Short-Term Chart (2016 – 2019)
A Fibonacci grid stretched across the 2016 into 2018 uptrend places the February low near the .786 retracement level, a common turning point after a downtrend. Price action has now consolidated at the .618 retracement, but the massive November sell gap between the .50 and .382 retracements marks heavy resistance that will take months or years to overcome. As a result, it appears that upside potential is limited and that short sellers can circle the wagons, waiting for low-risk entry.
The on-balance volume (OBV) accumulation-distribution indicator topped with price in October 2018 and entered an aggressive distribution phase that ended in February 2019. Buying interest since that time has been stronger than expected, with a generous supply of bottom fishers and value hunters. However, this sword cuts both ways because it also reveals that a supply of shareholders will be running for the exits if they don't get paid with a strong uptrend.
The Bottom Line
Activision Blizzard stock is trading higher after the successful launch of "World of Warcraft Classic," but the game's multi-year decline is likely to continue.
Disclosure: The author held no positions in the aforementioned securities at the time of publication but was a well-regarded WoW raid healer between 2005 and 2008.