Six Flags Entertainment (SIX) broke its March lows yesterday and gapped strongly to the upside today. It is no wonder that operators of the rides at Great Adventure make sure you are buckled in with a seatbelt. The last time we visited SIX was back in late October, and I recommended that "Aggressive traders could buy SIX here and on further strength. Risk below $59 for now. Target the $80-$82 area." Prices did not reach the $80-$82 area but you might have been able to bank $8 per share. SIX has been under pressure the past three months and broke nearby support yesterday only to gap higher today. The key questions to answer now are whether SIX can continue higher or if the underlying pattern is weak?
In this daily bar chart of SIX, below, we can see a weakening chart picture until today. Prices were trading lower in March and April below the declining 50-day moving average line but today prices gapped above that indicator. SIX also gapped above the flat 200-day moving average line. The daily On-Balance-volume (OBV) line shows a decline the past three months suggesting that sellers of SIX have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator is still below the zero line in bearish territory but if could move above the zero line if today's price strength persists.
In this weekly bar chart of SIX, below, we do not have today's price actin included but price are back above the cresting 40-week moving average line. With two more days in the week to go we do not know for sure if we will close above the line. The weekly OBV line has been weakening for the past four months and the MACD oscillator is almost below the zero line for an outright sell signal on this longer time frame.
In this Point and Figure chart of SIX, below, we can see an upside price target of $80 being projected but a rally to $71 is needed to give us a double top breakout.
Bottom line: Because SIX was weakening for the past three months before today's gap higher I would want to see a retest of the recent lows before turning more positive on the stock and looking for a place to go long. Be patient.