Todays Big Stock: Six Flags Entertainment (NYSE: SIX)

Sticking with the earnings season theme, I always believe that isolating stocks with clear breakdown and breakout points could be helpful in deciphering a stock’s future move once their earnings report is released. In addition, who doesn’t like clear entry points? A stock I recently identified with clear breakdown and breakout points is SIX. (Six Flags Entertainment Corp)

Six Flags Entertainment Corporation owns and operates 19 regional theme, water, and zoological parks in North America. Its parks offers a selection of state-of-the-art and traditional thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues, and retail outlets. Six Flags Entertainment Corporation also offers various multi-media marketing and promotional programs at its parks, as well as arranges for local radio and television programs to be filmed or broadcast live from the parks. Please take a look at the 1-year chart of SIX (Six Flags Entertainment Corp) below with my added notations:

SIX has created (2) very important levels over the last 5 months. The first would be the $40 resistance (red) and the other would be the $35 level (green), which has acted as support over the last couple of months.  SIX releases their quarterly earnings report next week and the levels of $35 and $40 will be important to watch for potential trading opportunities.

If by chance SIX were to break lower than $35, the level of $30 (navy) would be the next price to watch for a potential trade.

The Tale of the Tape: SIX has formed (2) clear levels of importance over the last several months at $35 and $40. With SIX set to release their earnings report next week, traders should monitor how the stock reacts to these levels.  A long trade could be entered on a hold of $35 or on a breakout above $40. However, if SIX were to break below $35, a short trade could be entered in expectation of a move lower.

Side note: If SIX were to move considerably lower, $30 would come into play for a trade.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT