A quality company with an extreme stock price.

This company is one of the largest video-game companies in the world.

This stock has fallen harder than most in recent months however the share price is triggering an important contrarian signal. Watch this stock for the start of a new uptrend and large gains are possible.

Activision Blizzard's (ATVI) video games include major hits such as World of Warcraft, Guitar Hero, Candy Crush, and Call of Duty. The company has a habit of publishing hit video games.

Shares are not immune from the overall technology stock decline but are now firmly in oversold territory.

I like to use relative strength index (RSI) to keep track of oversold and overbought levels. Readings above 70 is generally considered as overbought and likely to pullback whereas readings below 30 show the asset is oversold and due to rally.

Today, Activision is in oversold territory. And history says this could lead to a buying opportunity.

Since 2000 shares have returned an average of 22% a year for simply buying and holding. However you returns would be a lot higher if you were to buy during the rare periods of time when the RSI is reading oversold.

The safest way to play this potential trade is to wait for an confirmed uptrend to begin again. The uptrend will look similar to share price action between August and September. The share price stopped falling had a rally, pulled back a little but did not continue to new lows. Do not try to catch the falling knife.

Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.