Activision just had its worst day in 13 years, and one technician says it could be so bad it’s good

Video game stock Activision Blizzard is in the middle of a massive sell-off.

The stock fell more than 14% on Wednesday, its worst day since November 2008, after announcing delays for the latest releases in its Overwatch and Diablo franchises. The studio is grappling with sexual harassment and discrimination allegations that led to firings over the recent quarter and development disruptions.

Activision is by far the worst performer among the top video game stocks. Its shares have fallen 28% in 2021 – competitors Take-Two Interactive and Electronic Arts are also lower for the year, but at just a fraction of Activision's losses. The video game stocks, bid up during the worst of the Covid pandemic lockdowns, have fallen out of favor with the reopening this year.

"Now the stock has gotten very oversold on a weekly basis. You're down to levels in the mid-$60s which does hit … a trend from 2019, so a two-year area of trend line support," Mark Newton, global head of technical strategy at Fundstrat, said Wednesday of Activision's move on CNBC's "Trading Nation."

Activision's daily relative strength index, a measure of how overbought or oversold an asset is, has fallen below 26 – any reading below 30 indicates oversold conditions.

"It does make sense to consider taking a stab at a stock like this. It's already had its decline," said Newton. If "this is truly a [reopening] trend that's happening to all these companies, I don't know if I want to own the strongest one. I'd rather own the one that's already seen the bulk of that weakness. It's now getting oversold. So it makes a good case to consider buying it right here."

Take-Two Interactive reported earnings this week.

One-time Take-Two owner Delano Saporu, founder of New Street Advisors, is considering getting back into the stock. He said the product slate looks strong, especially with its sports releases such as NBA 2K. After underperforming the market this year, Saporu said the trend could be changing.  

"It's been down year to date, it was down. Last month, the stock trended up and I think there's still momentum there past earnings. So that would be one I would look at to possibly be reentering if there's a drop after earnings or if there's momentum further to the upside," he said during the same interview before the after-market earnings release.

Saporu added in an email to CNBC after Take-Two's earnings that the report supported his long-term belief in the stock. He specifically pointed to better-than-expected revenue, likely from major franchises such as Red Dead Redemption.

Take-Two has risen 16% in the past month. The shares are now down 14% from a February peak.

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