Cinemark Holdings, Inc. (NYSE: CNK) seems to be poised for a price surge as per its latest charts. The company, together with its subsidiaries, engages in the motion picture exhibition business.
Bullish Indications
#1 Downtrend Channel Breakout: As you can see from the daily chart, the stock has been trading within a downtrend channel for the past few months. This is marked in the daily chart in purple color. Currently, the stock is moving higher after breaking out of the downtrend channel with high volume. Once the stock breaks out from a downtrend channel, it has the potential to move further up.
CNK – Daily Chart
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating that the bulls are still in control. This is a positive indication.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#6 Symmetrical Triangle Pattern Breakout: The weekly chart shows that the stock had recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the chart as orange color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
CNK – Weekly Chart
#7 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart, and is also moving higher from oversold levels. This is a possible bullish indication.
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#8 Bullish RSI: In the weekly chart, the RSI is currently above 50 and moving higher. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of CNK above the price of around $18.90.
TP: Our target prices are $22 and $24 in the next 3-6 months.
SL: To limit risk, place stop-loss at $17.20. Note that the stop-loss is on a closing basis.
Our target potential upside is 16% to 27% in the next 3 to 6 months.
For a risk of $1.70, our target rewards are $3.10 and $5.10. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the trend channel with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
–Tara
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