Spring and summer are on the way, and that’s great news for the Leisure and Entertainment industry. In fact, the larger consumer discretionary sector has been outperforming the broad market throughout the economic recovery, but it has been picking up steam more recently as well.
After all, warmer temperatures are right around the corner for much of the U.S., and consumers will be hitting the golf courses and tennis courts, booking family vacations and heading to summer blockbuster films in droves.
The Profit Scanner powered by Recognia has identified four Leisure and Entertainment stocks that are looking ripe for long-side profits. In each case, the trade signals came via a key tool of technical analysis: moving averages.
Market volatility can wreak havoc on stock charts, creating “noise” in the form of day-to-day price swings that have very little to do with the specific stock’s underlying trend. To combat this, chartists plot out a stock’s moving average to, essentially, make it easier to identify that larger trend…and thereby get a better idea of where the share price is headed from here.
Read on for four bullish signals derived from analyzing the stocks’ moving averages.
Six Flags Entertainment Corp (NYSE:SIX)
Six Flags Entertainment Corp (NYSE:SIX) just enjoyed one of the classic moving average signals: a bullish moving-average crossover.
When a stock price crosses above a key moving average, as SIX did at the Mar. 9 close, then it basically confirms that the shares are in an established uptrend.
Now, to determine what to do with this information, you’ll have to take a closer look at the data.
First of all, note the timeframe used in this particular moving average. Simple moving averages (like the ones used by Profit Scanner) are calculated by adding up the stock’s closing prices over a particular timeframe, then dividing by that number.
Longer timeframes have long-term implications, while shorter timeframes have short-term implications. In this case, SIX crossed above its 21-day moving average, which is a short-term bullish signal.
Traders should also note that moving averages are lagging indicators — being based on historical data — and are best used in tandem with other indicators, particularly the MACD and the Momentum indicators. So, good news: on Mar. 11, SIX had a bullish signal from its Momentum indicator.
In the last section of the above chart, you can see that SIX’s Momentum indicator just crossed back above the flatline. What this indicator tells you is the strength of a price trend; we already know that SIX is trending higher (from the 21-day moving average crossover), and this confirms that it is a strong enough uptrend for a short-term long trade.
ClubCorp Holdings Inc (NYSE:MYCC)
ClubCorp Holdings Inc (NYSE:MYCC), a North American operator of golf clubs, country clubs, and business/alumni clubs, also enjoyed a bullish moving average crossover this week.
In MYCC’s case, it was a crossover above the 200-day moving average:
As mentioned before, the timeframe of the moving average in question is important…and since this was a 200-day moving-average crossover, it suggests a long-term uptrend for MYCC shares. But the above chart shows that ClubCorp’s MACD and Commodity Channel Index indicators are both in bullish territory as well — which lends support to a short-term trade as well.
A bullish MACD suggests that the stock price is gathering strength, and a bullish Commodity Channel Index is further confirmation that the stock is trending above its moving average.
Netflix, Inc. (NASDAQ:NFLX)
Another popular moving-average signal is the Double Moving Average Crossover: when a faster moving average crosses a slower moving average.
That’s just what happened for Netflix, Inc. (NASDAQ:NFLX) on Mar. 10, when its 50-day moving average crossed above its 200-day m.a. — a bullish intermediate-term signal:
With both the 50-day and the 200-day moving averages trending higher, NFLX was already in a bullish trend, and the Double Moving Average Crossover was a specific bullish event within that trend.
As you might guess, the direction of the crossover is crucial: If the faster moving average had crossed below the slower moving average, that would have been a bearish event. But, again, the moving-average analysis for Netflix is encouraging for those looking for a long-side trade.
Pinnacle Entertainment, Inc (NYSE:PNK)
Last but not least is Pinnacle Entertainment, Inc (NYSE:PNK), a U.S. casino operator that enjoyed a Double Moving Average Crossover of its 50-day and 200-day moving averages on Mar. 11:
As with Netflix, this is an intermediate-term bullish signal. PNK enjoyed a 15% gain on Mar. 9 alone on news that Gaming and Leisure Properties Inc (NASDAQ:GLPI) has offered to buy Pinnacle for $4.1 billion.
The rally followed through to Mar. 10, and PNK stock had gained more than 30% by Mar. 12. Traders who are late to the party can take the Double Moving Average Crossover as confirmation that PNK’s move higher could still have some legs in the days and weeks to come.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.
