A key level of resistance has formed in the chart of Cedar Fair LP (FUN). If this level is surpassed, the stock could see a breakout.
FUN operates amusement park-resorts located in various states across the USA and Canada, including Cedar Point, Kings Island, Canada's Wonderland, Dorney Park and the Wildwater Kingdom, Valleyfair, and more.
The company has been struggling during the pandemic as many parks were closed during the lockdown. In its most recent financial results, revenue was down 88%. The company is currently burning through cash and $300 million in new debt was issued at the start of the fourth quarter.
FUN only had $225 million in cash as of the end of the last quarter, compared with $2.7 billion in long-term debt. Though the company does have a current ratio of 1.2, indicating it can meet short-term liabilities.
Sales are down over 72.5% for the past year, but are expected to grow 425.8% next year as the vaccine rollout continues. Even still, the stock has a high Price to Sales ratio of 5.6.
While the stock has shown bearish momentum over the long-term, its recent performance has been positive. This has led to a “Neutral” rating in our POWR Ratings system.
Take a look at the 1-year chart of FUN below with my added notations:
During the past six months, FUN has formed a key level of resistance at the $40 (red) mark. The stock has tested that level multiple times and has now sits just below that $40 again.
A solid close above $40 likely means higher prices for FUN. Therefore a long trade could be entered on a breakthrough of the $40 level.
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FUN shares were trading at $39.49 per share on Tuesday morning, down $0.15 (-0.38%). Year-to-date, FUN has gained 0.38%, versus a -1.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp, CMT
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock.
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