Regal Entertainment Group (NYSE: RGC) operates almost 550 movie theaters in theUnited States, which comes to almost 6,800 screens. With that sort of scale the company is a cornerstone in theU.S. movie theater operations market and closely watched for its metrics each earnings season.
After regular market trading on Thursday, June 28, the company announced second-quarter earnings that beat expectations on EPS and revenues considerably. EPS came in at 24 cents versus a 19-cent estimate, and revenues were $753.3 million versus an estimated $762.1 million. 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 almost 13% on Friday, July 29.
On the weekly chart looking back to 2006, the stock still looks very much in a downtrend, 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, currently around $16, is broken to the upside.
On the daily chart looking back to March 2010, we note another down trending resistance area (blue line) that might now become an area of attraction (read profit target) after Friday’s big rally.
The close-up chart dating back to February again shows the downtrending resistance area from the daily chart above, which could be where the stock is heading over the course of the next several months on the back of the sharp rally on Friday. More importantly however, Thursday’s low in the stock marked a higher low compared to the July 18 lows, and the slow stochastics momentum oscillator got nowhere near the oversold reading it was on July 18. This speaks for further upside.
The trade I see setting up here is to go long near the closing levels of Friday (around $12.80), with a target around $14 and stops near $12. Given the strong cross winds in the market currently, it would be wise to scale out of this position every couple of percentage points the stock moves higher.