Regal Entertainment Group (NYSE: RGC) operates almost 550 movie theatres in the United States, which comes to almost 6800 screens.  With that sort of scale the company is a cornerstone in the U.S. movie theatre operations market and closely watched for its metrics each earnings season.

After regular market trading on Thursday June 28th the company announced its second quarter earnings and beat expectations on EPS and revenues considerably; EPS $0.24 vs $0.19 estimated and revenues $753.3M vs $762.1M estimated.  Additionally, cinema attendance numbers were among the primary concerns for some analysts and those came out better than anticipated.  Investors rewarded the stock by bidding it up no less than 12.89% last Friday, July 29th.

On the weekly chart looking back to 2006 the stock price of Regal Entertainment Group (NYSE: RGC) still looks very much in a down-trend, although it has found horizontal support roughly around the $11-$12 mark several times in 2009, 2010, and so far in 2011.  The longer-term chart wouldn’t set up to be bullish until that blue downtrend line is broken to the upside…currently that mark is around $16. 

 

On the daily chart looking back to March 2010 we note another down trending resistance area (blue line) that however might now become an area of attraction (read profit target) after Friday’s big rally. 

 

The close-up chart dating back to February of this year again shows the down trending resistance area from the daily chart above, which could be where the stock is heading to over the course of the next several months on the back of the sharp rally last Friday.  More importantly however, last Thursday’s low in the stock marked a higher low compared to the July 18th lows and the slow Stochastics momentum oscillator got nowhere near the oversold reading it was on July 18th.  This speaks for further upside.

 

The trade I see setting up here is to go long near the closing levels of last Friday (around $12.80), with a target around $14 and stops can be set near $12.00.  Given the strong cross winds in the market currently it would be wise to scale out of this position every couple of percent the stock moves higher.

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