Cinemark Holdings (CNK) is approaching a key resistance level. If the level is surpassed a breakout could occur.
CNK is the third- largest motion picture exhibitor in the United States. The company operates 4,568 screens in 37 states and 12 Latin American countries.
The company has been struggling due to limited attendance amid the coronavirus pandemic. But it has plenty of liquidity to hold it over until the vaccine distribution takes effect and moviegoers start coming back. Last week B. Riley raised its price target for the stock to $28, which is over 50% higher than its current price.
CNK had $826 million in cash as of the end of the last quarter, compared with $3.6 billion in long-term debt and only $ million in short-term debt. While sales are estimated to be down 88.2% (year over year) in the fourth quarter, they are expected to rise 174.5% for 2021.
It has a very low 8.29 trailing P/E and 1.63 Price to Sales ratio. The company has shown some recent weakness, but is up over 15% for the past month. This has led to a “Neutral” rating in our POWR Ratings system.
Take a look at the 1-year chart of CNK below with my added notations:
Over the past two months, CNK had formed a key level of resistance at the $18 (green) mark. The stock broke through that level last week on route to the next level of resistance at $20 (red). Now that CNK is pulling back, the old $18 resistance may act as new $18 support in preparation for a run higher.
A long trade could be entered if CNK breaks the $20 resistance level.
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CNK shares fell $0.58 (-3.12%) in premarket trading Friday. Year-to-date, CNK has gained 3.45%, versus a 2.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp, CMT
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock.
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