Activision Blizzard

We're seeing a similar setup right now in shares of video game maker Activision Blizzard ( ATVI). Activision had been struggling lower, until a surprise in first quarter guidance sparked a huge gap up in shares. While investors should be excited about the 36% gains they've seen in 2013, there's reason to believe this stock is headed lower.

That's because, like Facebook, Activision Blizzard is currently forming a head and shoulders top pattern. The setup is in earlier stages than Facebook's make-or-break pattern, but it's still worth heeding with a neckline level at $14. If ATVI moves through $14, I'd recommend being a seller.

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Momentum, measured by 14-day RSI, adds some extra downside confidence to this trade. The RSI uptrend in ATVI broke after shares completed forming their left shoulder, and the momentum gauge has been making lower highs since. Because momentum is a leading indicator of price, it makes sense to watch this name closely in March; its quick move upward in the first quarter could make for an equally quick move downward in the second.

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