NEW BEARISH Plays
Lions Gate Entertainment - LGF - close: 29.37 change: -0.98
Stop Loss: 31.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Entry on January -- at $---.--
Listed on January 14, 2015
Time Frame: Exit prior to earnings in early February
Average Daily Volume = 1.2 million
New Positions: Yes, see below
Why We Like It:
Everyone loves the movies. While 2014 had some pretty big hits total box office receipts for the industry were $10.3 billion. That's a -5% drop from the 2013. "The Hunger Games: Mockingjay - Part 1" was one of the most successful films last year with a gross of $309 million.
LGF is the studio that makes the Hunger Games movies. According to the company, "Lionsgate is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, channel platforms and international distribution and sales. The Company currently has more than 30 television shows on over 20 different networks spanning its primetime production, distribution and syndication businesses."
In addition to The Hunger Games, LGF also makes the new Divergent films, which could be a big hit although probably not as big as Games.
The company has also seen success in television with hits like Mad Men, Nurse Jackie, and Orange is the New Black. However, the stock tend to trade around its movie releases. That could prove challenging.
The last Hunger Games move is now last year's news. Shares of LGF could lack any serious catalyst to move the stock until the next round of movies come out. The next Divergent movie ("Insurgent") is expected to come out in March this year. Meanwhile the Mockingjay - Part 2 doesn't hit theaters until November 2015. If the stock's action is any indication then Wall Street is not very enthusiastic over the next Divergent movie.
Shares failed multiple times in the $35.50 area from mid November through December 1st. This is now a new lower high on the weekly chart (see below). While the broader market rallied in December, shares of LGF were under performing. That underperformance has continued into 2015.
Investors have taken notice of LGF's weakness. The most recent data listed short interest at 18% of the 84 million share float. The point & figure chart has turned bearish and is currently forecasting at $24 target but that could get worse.
Today LGF is about to test support at $29.00. A breakdown there could be our entry point. Tonight we're suggesting a trigger at $28.85.
Trigger @ $28.85
- Suggested Positions -
Short LGF stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the FEB $30 PUT (LGF150220P30) current ask $1.80
Option Format: symbol-year-month-day-call-strike