Swing traders are always looking out for the next big opportunity, but several sectors operate on a cycle that can be entirely predictable. The entertainment industry can be one of the most predictable sectors to swing trade if you know what you’re doing. By taking in account a few tips, you can have a swing trading strategy that you can be proud of, not to mention earn you a healthy profit in the meantime.
Look for Release Cycles
In the video game industry, there is a strong release cycle that is followed every year. Each year, major publishers like Activision-Blizzard, Ubisoft, EA, and Nintendo release new games in October and November to capitalize on the Christmas craze. Sales performance of these titles tend to show up in the January-Feb-March months, so buying shortly before a game’s release in October and selling after sales reports land in April can be a solid swing trading strategy. Picking the winners in these sales booms can be hard, but technical analysis and keeping your ear to the ground will help you. Even holding video game stocks like ATVI can net you plenty of short-term profits. ATVI is up 180% compared to 2015 values, and that is only rising with games as a service model taking over.
Follow Major Players
Microsoft, Sony, and Nintendo are the three big players in the video game industry. These three companies produce hardware needed to play games, and their stock performance is directly affected by how well their system is doing. During the Wii U era, Nintendo’s stock was down because the Wii U was not a very popular console. It only achieved lifetime sales of less than 15 million units, which the Switch surpassed just one year after its release. However, buying Nintendo stock during this downturn and selling during the height of profitability with the Switch would net large returns. Consoles generations tend to have a shelf-life of around six to seven years. Beyond that point, it becomes increasingly harder for the hardware to keep up. Consider investing in video game companies before their next generation console is announced to ride the wave of excitement (and sales) for the next generation.
Be Aware of the News
Plenty of economic sectors are getting pounded in the news thanks to President Trump’s trade war with China. Thankfully, the entertainment sector seems to be mostly immune to this. However, you should always be on the lookout for news that could affect your investments. For example, recently Belgium declared that loot boxes in gaming is a form of gambling, which has highlighted games and publishers that rely on this method of distribution. The furor rose last year after the release of Star Wars: Battlefront II contained microtransactions that negatively impacted the balance of a multiplayer game. Government regulation of loot boxes could severely impact a company’s ability to make a profit from its games as a service model if those loot boxes can no longer be sold in the same way.
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