Tuesday, December 6, 2016

Lions Gate

Lions Gate Entertainment engages in motion picture production and distribution, television programming and syndication, home entertainment, branded channel platforms, interactive ventures and games, and location-based entertainment in Canada, the United States, and Internationally.

Lions Gate the stock has been trading sideways for 10-months after a prolonged decline in which sellers were in complete control. Over the last 10-months, the buyers and sellers have seemed to found equilibrium and the buyers are taking control as you can see in the chart below.

I have always been a big fan of long bases because typically a prolonged period of contraction leads to an extended period of expansion. Stan Weinstein, the author of Secrets For Profiting in Bull and Bear Markets, has the best definition for a stock's basing area.

The Basing Area: "After XYZ has been declining for several months, it eventually will lose downside momentum and start to trend sideways. What's actually taking place is that buyers and sellers are starting to move into equilibrium, whereas previously the sellers were far stronger, which is why the stock had plummeted. Volume will usually lessen--dry up--as a base forms. But often volume will start to expand late stage 1, even though prices remain little changed. This is an indication that dumping of the stock by disgruntled owners is no longer driving down the price. The buyers who are moving in to take the stock off their hands are not demanding any significant price concession."

What's also interesting about Lions Gate is the two huge insider buys by an insider who bought a total of 90k shares, a $2-million dollar investment. There's a million reason why you sell a stock but only one reason why you buy'em.

TRADE; Own the stock going through and holding $24, stop at $22.

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463. 

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