Hot tech stock Activision will keep surging, says trader

It's game on for Activision Blizzard, says TradingAnalysis.com founder Todd Gordon, as the charts are pointing to new high scores – or new all-time highs, rather – for the gaming stock.

Gaming stocks have surged over the past year. Activision has seen a 76 percent rise while rivals Take-Two and EA have also skyrocketed 129 percent and 42 percent, respectively, in that time. The rally in the space has been driven by strong video game sales and the growing esports industry, one Activision is now heavily involved in with Wednesday's launch of the company's Overwatch game esports franchise league.

But aside from strong fundamentals, Gordon also sees an Activision breakout out from a technical standpoint.

"There's a good breakout going here through the $68 level," he said Thursday on CNBC's "Trading Nation." "I'd like to take advantage of continued upside here in Activision as we break through $68."

To play for the breakout, Gordon suggested buying the February 67.5/72.5 call spread for $2.25, or $225 per options spread. This is a bullish strategy where someone will buy a call and sell a higher strike call of the same expiration to offset the cost. The goal is for the stock to rise above that lower strike call by more than the cost of the trade, or in this case above $69.75 by Feb. 16.

But Gordon is also keeping his eye out for the company's earnings report on Feb. 8.

"Earnings are on Feb. 8, so if we have a nice comfortable margin in this trade, go ahead and carry it through," he said. "If we don't and you want to book profits ahead of earnings on Feb. 8, cut the trade."

Activision has rallied more than 9 percent since the start of the year, fueled this week by the Overwatch League's launch.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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