Betting On The Best Gamers

From the desk of Steve Strazza @Sstrazza

When going over some of this week's content ideas with JC, I told him "I can't possibly write another post about Tech stocks, but I want to."

His response was simple: "That's information."

In other words, based on the thousands of US Equities charts I'm looking at each week, the strongest uptrends continue to be in Technology $XLK. The fact that it almost seems too good to be true, or that I feel like I'm beating a dead horse about "tech, tech, and more tech" - is all the more reason to remain bullish.

We can't change the fact that there's a lot of good stuff going on in the space right now. We can only interpret the data in front of us, and right now, it's saying we should keep buying Tech.

So is this.

The uptrend has definitely gone parabolic. But take a look at the data going back 20-years in the chart insert... we're still a long way off all-time highs in this ratio. We think we eventually get back there. With that as our outlook, how could we not want to keep buying Tech?

That brings us to this week's Mystery Chart. Thanks to all those who participated. We had a lot of buyers this week, and for good reason.

It was a daily chart of the Video Game ETF $GAMR which is breaking out of a multi-year base to fresh all-time highs.

We continue to find pockets of strength in various Industry Groups, particularly within Technology. Gaming has been incredibly strong for months, rebounding in a straight line off its March lows. Now that we are finally back above 2018's highs, we have a precise level to define our risk against.

Looking deeper into the ETF holdings and there are a handful of well-defined setups in names exhibiting relative strength. We'd rather express our bullish thesis through these individual components as opposed to GAMR itself.

Here are some strong stocks that we've liked for a while, but are not currently actionable.

Electronic Arts $EA...

And Activision Blizzard $ATVI...

Notice the resilience in these names at the March lows as sellers were unable to push momentum into oversold range. This is a common characteristic among many of the best-performers coming out of Q1's crash. While these are nice uptrends and we're expecting higher prices in the weeks and months to come, the risk/reward isn't favorable for EA and ATVI at current levels.

But don't worry, there are plenty of other names where it is. Let's dive in and share some trade ideas in them.

First, we have one of China's Tech giants, Tencent $TCEHY. Not only is this one in the Gaming space which we like right now, but also Chinese Internet/Tech, another area we are currently bullish on. What's not to love?

Here is a short-term chart showing prices rocket more than 50% off their March lows.

It's easy to look at a chart like this and think it's gone too far too fast, so let's zoom out and see what the longer-term trend looks like.