I am always on the lookout for stocks that breakout to all time highs. When a stock makes an all time high it has two positives in its favor that can make it go even higher: 1.There is no overhead resistance and 2. Everyone short the stock is now losing money. One stock that last week made an all time high was Lions Gate Entertainment Corp. (LGF).
Looking at the daily chart, we can see that LGF broke above $16.00, hitting $16.45. The shares had come close to $16 three times previously and failed, so the breakout can be considered significant and it signals higher prices. I would expect to see a run to $22 over the next month.
The weekly chart is even more telling as the chart broke out of an ascending triangle and gives LGF a long term target of $26.00.
Six Reasons LGF Will Trade Higher
1. Twilight. The final Twilight movie will hit the big screens on November 16th. The Twilight series has been a big success for LGF and we could see a boost in the share price in anticipation of the media attention around Twilight and its expected box office success.
2. LGF reports earnings. On November 7th, LGF will report its earnings and I think we could see it beat numbers as the hit show Anger Management will be included in the numbers for the first time.
3. We could see a short squeeze. Everyone short the stock is losing money. This increases the likelihood that the shorts will throw in the towel and buy back the stock. LGF has 144 million shares outstanding, however out of that approximately half the shares (MHR - 51 million, Capital Growth - 16 million and growth fund manager Fred Alger - 2 million) are in strong hands, long term holders aligned with the company. LGF has 13 million shares short and that means the real short position is 17%. It is quite conceivable that with LGF at new all time highs we could see a short squeeze drive prices higher.
4. No Overhead Resistance: As I mentioned earlier, stocks that make all time highs have no overhead resistance. This is because there are no overhead prices where investors are waiting to sell so that they can get out even. One example is Walt Disney Co. (DIS); in May, Disney broke out to new highs at $43 and over the next 5 months rose $10 to $53.
5. Price targets raised. 9 analysts cover LGF with a high price target of $22 and a low of $16. With solid results, the recent paying down of higher expense debt and in front of the Twilight finale we could see analyst's price targets being raised.
6. Hunger Games. LGF now has long term visibility due to its Hunger Games franchise. Hunger Games is the 12th biggest grossing movie of all time. With three more movies of the 3 book series set for release in November 2013 and each subsequent November until 2015, LGF investors now have confidence that earnings will continue to rise for the next few years.
Disclosure: I am long LGF.