I follow your advice regularly. It seems CGX has hit a wall around $50. If I sold it now I would have a very nice profit.
Is there any upside for this stock?
Thanks for the assignment and congratulations on a profitable call! I’m delighted that you are getting some value from my efforts. Your question is one that come up quite frequently in asset management. When is the right time to bank profits. I have often suggested that a stock is like a racehorse.
If you find yourself in the winners circle you have to ask yourself should you let your thoroughbred rest or put them back in the race? Not only should you consider the strength of the horse but the fortitude of the jockey and trainer. What I also advise is that if you are questioning how to proceed you might want to throw to cash and take yourself out of the risk pool. Often if we get edgy about an investment it helps to get out of the rain and let the noise subside.
This will be the second time that I give the charts for Cineplex Inc. (CGX TSX) a workout. The last was on July 27, 2015 when the shares were trading for $48.41. Tia wanted an opinion on a long term hold for say five years.
I alerted Tia that making a forecast five years out would be reckless at best. Five years is a lifetime in the investing universe. It is best to develop an investment thesis and then monitor your holding on a regular basis.
An re-examination of the charts will help determine if there are indications that CGX is on the verge of a new up leg.
The three-year chart depicts a stock that has exhibited a tendency to move up then plateau before starting a new advance. In the July 2015 post it was noted that the MACD and the RSI were pointing to continued selling which dragged the stock down to its 52-week low of $42.00 by late August of 2015. What the research also identified was the resistance that comes in near $50.00 goes back to March of 2015.
The six-month chart provides a close-up of the resistance near $50.00 and the sell signals generated by the MACD and the RSI that surfaced in late March. What is also evident is that since the beginning of March CGX has been trading in a tight range with support at $49.50 and resistance at $50.50.
At this moment there is little evidence to suggest that we might expect a new advance to begin in the short run.
CGX is dependent on the strength of the movies released by the major studios to fill the seats. A weak schedule can lead to fewer visitors and lower sales at the concession stands. You also need to measure the disruptive effect of technology which has many people staying in and streaming films to their homes. Finally the company controls close to 80% of the seats in the exhibition business. You have to ask yourself how much growth is left if they have that much control?
The yield on the dividend is 3.14% which also has to be evaluated in your decision matrix. For me CGX is a hold with the advisory that it needs to be on your radar everyday until it we see if it breaks down or breaks out! You will have to determine if a hold suits your investor profile.
Next time I will audit the charts of Concordia Healthcare Corp. (CXR TSX) for Tom.
Make it a profitable day and happy capitalism!