Thanks for your analysis of stocks. Very much appreciated especially TECK.B, BBD.B, BAM.A, BIP.UN and SLW.
I was wondering if you can comment on Cineplex for long-term hold (5 yrs.).
Thanks for the assignment. I am happy to see that you are making use of the studies conducted for other readers. This will be the first time that I explore the opportunities and risks associated with Cineplex Inc. (CGX-T). CGX operates 162 movie theatres across Canada and entertains 74 million guests annually. The company has consolidated the movie exhibition space and now controls close to 80 per cent of seats coast to coast.
The relationship between exhibitors and movie studios is symbiotic. Studios earn a large portion of their annual revenue from the box office. Films typically generate 85-90 per cent of their box office in the first 3-4 weeks of release.
Exhibitors earn from the box office, concession sales, in-house advertising on the screen, in the theatre and through their free fanzines. CGX also has a number of other revenue streams that leverage their entertainment prowess.
However, here's the rub. If the lineup of films on the release schedule fails to get bums in seats, it can lead to less than robust revenues for CGX.
An analysis of the charts will help identify the trend, support, and resistance that are present, but, unfortunately, I cannot give you a five-year view on this or any other stock. Five years is a lifetime when it comes to investing, especially when we consider the disruptive technologies that have had a negative effect on other forms of entertainment
The three-year chart details the downtrend that has been in place since CGX hit its 52-week high of $51.01 in early March of this year. The moving average convergence divergence (MACD) and the relative strength index (RSI) generated sell signals as the shares had become overbought.
What is also evident is that there is a base of support near $46.50 which could form the basis of a bearish descending triangle pattern. Until the descending triangle is resolved, investors need to increase their surveillance to protect their downside.
The MACD and the RSI on the six-month chart are pointing to continued selling that could take CGX to a retest of support at $47.50 and below that at $46.50.
Make it a profitable day and happy capitalism!
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