Weekly Futures Recap With Mike Seery

Gold Futures

Gold futures in the June contract settled last Friday in New York at 1,275 an ounce while currently trading at 1,283 up about $8 for the trading week bouncing off of major support which stands at the 1,267 level. I'm sitting on the sidelines as my only recommendation in the precious metals is a short copper play as gold prices look interesting and I think if the 1,267 level is broken a bear market will develop, so that is the key price level to keep an eye on. Gold prices are still trading below their 20 and 100-day moving average as the trend is to the downside, and if you take a look at the daily chart, the downtrend line remains intact as the bullish trend would not develop until prices break the 1,304 level in my opinion so play this to the downside. Silver prices continue their bearish trend as that is also putting pressure on gold, but one of the main influences on gold is the fact that the U.S dollar hit a two year high in yesterday's trade and that looks to move even higher in my opinion. The chart structure in gold will start to improve in next weeks trade therefor the risk/reward will become in your favor as I do think there are a lot of sell stops at the 1,267 level.
TREND: LOWER
CHART STRUCTURE: IMPROVING
VOLATILITY: AVERAGE

Silver Futures

Silver futures in the July contract is currently trading lower by 6 cents at 14.55 an ounce after settling last Friday in New York at 14.37 up about $0.17 for the trading week but remains in a bearish trend. I'm not involved in silver but it still looks like weaker prices are ahead, and if you are short a futures contract I would place the stop loss above the 10- day high which stands at 14.86 as an exit strategy as the chart structure is outstanding due to the fact of low volatility. If you take a look at the daily chart, the downtrend line remains intact, but for the bearish momentum to continue the May 21st low of 14.35 has to be broken and if that does occur I think you could test the upper 13 level as weak demand continues. The U.S dollar hit a 2-year high this week, and that is also putting pressure on silver, however, inflation is minimal at this particular time as industrial metals continue to remain weak as deflation could be a problem as inflation certainly is not as I see no reason to be a buyer of silver at this time. Silver prices are trading under their 20 and 100-day moving average telling you that the trend is to the downside as the entire precious metal sector remains bearish.
TREND: LOWER
CHART STRUCTURE: EXCELLENT
VOLATILITY: LOW

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AMC/Avengers: Endgame Propelling Box Office Numbers

Avengers: Endgame has shattered virtually every box office record with the elusive worldwide top grosser, Avatar in its sights. Avengers: Endgame and its unheard of box office numbers came on the heels of Captain Marvel which initially pumped life back into the domestic box office, delivering an epic $153 million opening weekend debut, while hauling in $455 million worldwide. AMC Entertainment Holdings Inc. (AMC) stands to benefit significantly across its business segments due to the popularity of the Marvel franchise and a robust slate of movies for the remainder of 2019. AMC will likely have a nice catalyst as the slate of 2019 movies roll out, and the box office numbers strengthen over the next nine months. To smooth out these box office revenue fluctuations, AMC has a rapidly growing loyalty program with over 800,000 members to evolve a large segment of its business mix towards a subscription-based model. This will allow durable and predictable revenue streams in the backdrop of changing box office dynamics. AMC offers a great dividend yield of over 5% and accelerating revenue and EPS growth. The company is reengaging the consumer via digital, mobile, and loyalty program options, reformatting theaters to enhance the user experience and international expansion augmented by a healthy share buyback program. The stock looks very attractive, considering its depressed valuation, solid Q1 earnings, and company initiatives to drive the consumer experience. The long term growth narrative remains intact while revenue continues to grow at a healthy clip with a healthy 9-month movie slate ahead for the remainder of 2019.

Impressive Back-to-Back Quarterly Numbers

AMC has been firing on all segments of its business on improving fundamentals across the entire enterprise over the previous two quarters. For Q4 2018, AMC beat on both the top and bottom line with EPS beating by $0.22 and revenue beating by $10 million. Q4 attendance in the U.S. set a record for the fourth quarter and coupled with the quarterly numbers; the stock popped 10%. Q1 2019, historically its weakest quarter was going against a very tough comparable year-ago quarter that included Black Panther. Considering this tough year-over-year comparable, attendance per screen declined 10.1%, and total attendance was down 12.2% year-over-year. However, food and beverage per attendee came in at a record for Q1. Taken together, revenue was down 13% at $1.2 billion however this beat consensus estimates by $10 million.

Looking ahead, AMC expects better traffic. "We have high expectations for 2019, due to an extraordinary slate of movies coming, the timing of releases within the film slate suggests that it will be a back-end loaded year," says CEO Adam Aron.

“Even with the anticipated slow start to the year, we have been and continue to be quite bullish about the full year prospects for AMC. Also, the first quarter of 2019 faced a tough year-over-year comparison, as Black Panther last year made the first quarter of 2018, the second highest grossing first quarter of all time. As we thought it was likely for our U.S. theatres, in our largest market by far, the U.S. industry box office declined a healthy 16.2% this quarter. Even so, we are comforted that AMC continued to outperform the U.S. industry box office, notably with domestic attendance per screen declining only 10.1% in the first quarter of 2019. Additionally, our U.S. food and beverage capture of $5.23 per patron set a new first-quarter record for our company. This all is largely attributable to the power of the AMC platform: stemming from experiential initiatives and enhancements at our theatres; a frictionless use of technology to communicate, engage and sell to our guests; combined with the soaring popularity of our AMC Stubs loyalty program and our AMC Stubs A-List subscription program.”

“Accordingly, we continue to be excited about the remainder of 2019, which we believe might be the highest grossing 9-month period in cinema history. We are optimistic that the full year 2019 box office will be at least as strong as 2018, and potentially could be the first year ever that the domestic box office breaks $12 billion.”
Adam Aron, CEO, and President of AMC

It’s noteworthy to point out that the full year of 2018, the U.S. box office was up 6.9% to $11.9 billion, marking the highest grossing year ever recorded with February, April, June, and October setting all-time box office monthly records. Given the slate of movies over the next 9-month period, AMC thinks it’s entirely possible to eclipse the full year 2018 numbers.

2019 Box Office Comes Alive

Disney (DIS) has finally released its first highly anticipated film of 2019 with Captain Marvel (the first female lead for a Marvel film). The film has performed exceptionally well, delivering an opening weekend box office gross of $457 million worldwide and $153 million domestically. The first two months of the year for the domestic box office has been a struggle relative to 2018. Captain Marvel brought in the third highest March opening of all-time and placed the film on par with past blockbusters such as The Dark Knight, The Hunger Games and Rouge One. On the heels of Captain Marvel was, of course, the elephant in the room, Avengers: Endgame which shattered nearly every record at the box office and aiming to take out Avatar as the highest grossing movie of all-time (Figure 1). Avengers: Endgame has generated $780 million at the domestic box office and $2.62 billion worldwide. On the domestic front, the film stands as the second highest grossing film behind Star Wars: The Force Awakens with $936.6 million. On the international front, the film currently stands in a close second behind Avatar with $2.788 billion. Disney alone has Aladdin, Toy Story 4, Lion King, Frozen 2 and Star Wars Episode 9 in its slate of films that will bode well for the box office on the domestic front as these films stand to rack in billions in box office receipts.

Box Office
Figure 1 – Avengers: Endgame shattered nearly every box office record domestically and internationally

Loyalty Game-Changer

AMC’s loyalty program now has over 800,000 subscribers, which is expected to generate more than $150 million of annual recurring revenue. This will provide further penetration on the revenue front in excess of $300 million when factoring in food and beverage purchases and full fare tickets purchased by bring-along guests such as family and friends. The loyalty program provides an opportunity to shift a segment of its business mix to a subscription-based model, providing durable and predictable revenue streams, mitigating box office fluctuations, and driving long-term customer loyalty. Under this ticket subscription program, members can attend up to three movies per week in every available showtime and format. These membership numbers far exceed the company’s goal of 500,000 by mid-June 2019.

Due in large part to the loyalty program, B. Riley FBR upgraded shares of AMC to a buy. Summer is coming and "The impressive advance ticket sales for Avengers: Endgame signals the start of the spring/summer period and we are increasingly optimistic around the potential contribution of Stubs A-List," analyst Eric Wold says. The company will keep maximizing the attractiveness of the subscription plan "as well as the efficiency/profitability of the plan to the company." The firm raised its price target to $20 from $18.

Conclusion

Avengers: Endgame provided a much-needed jolt to start off the remaining 9-month period to close out 2019. AMC is optimistic that the strong slate of movies coming out over the next nine months may propel the year-end box office numbers to eclipse the record numbers seen in 2018. AMC is sitting on a host of positive tailwinds despite the slow start to the 2019 box office numbers domestically. A large slate of movies is just now beginning to be released with Captain Marvel and Avengers: Endgame. AMC is reengaging the consumer via digital, mobile, and loyalty program options, reformatting theaters to enhance the user experience and international expansion. The loyalty program now has over 800,000 members and provides an opportunity to shift a segment of its business mix to a subscription-based model, providing durable and predictable revenue streams, mitigating box office fluctuations and driving long-term customer loyalty. The stock is a compelling buy with a dividend yield of over 5% and accelerating revenue and EPS growth. The stock looks very attractive considering its depressed valuation, industry strength forecasted through 2019 coupled with a slew of company initiatives to drive the consumer experience.

Check out my previous article on AMC here.

Noah Kiedrowski
INO.com Contributor

Disclosure: The author does not hold shares in any of the mentioned stocks or ETFs. However, he may engage in options trading in any of the underlying securities. The author has no business relationship with any companies mentioned in this article. He is not a professional financial advisor or tax professional. This article reflects his own opinions. This article is not intended to be a recommendation to buy or sell any stock or ETF mentioned. Kiedrowski is an individual investor who analyzes investment strategies and disseminates analyses. Kiedrowski encourages all investors to conduct their own research and due diligence prior to investing. Please feel free to comment and provide feedback, the author values all responses. The author is the founder of www.stockoptionsdad.com where options are a bet on where stocks won’t go, not where they will. Where high probability options trading for consistent income and risk mitigation thrives in both bull and bear markets. For more engaging, short duration options based content, visit stockoptionsdad’s YouTube channel.

DOW On Track For 5th Straight Losing Week

Hello traders everywhere. As we head into afternoon trading on the verge of the holiday weekend there isn't much to rejoice about in the stock market. The DOW is on track to post it's fifth straight weekly loss standing at roughly -.80% on the week. Not to be outdone the S&P 500 and NASDAQ will post their third straight week of losses losing -1.7% and -2.1% respectively.

The mounting losses are all due to the ongoing trade war/negotiations with China. Stocks are in the green after President Trump said that the ongoing trade war could be over quickly, he told reporters on Thursday afternoon he expected the U.S.-China trade war to end swiftly. He also noted a trade deal with China could lift tough restrictions on the Chinese telecom giant Huawei.

5th Straight Losing Week

Crude oil prices are down more than -7% this week as trade worries spilled over to other markets. The increased tension in the U.S.-China trade war, which has investors increasingly worried about the state of the global economy and, by extension, the outlook for global oil demand growth for the rest of the year. Oil prices were battered by the clouded outlook on the global economy and oil demand, on top of Wednesday's bearish EIA inventory report, which showed a crude oil inventory build of 4.7 million barrels in the week to May 17. Continue reading "DOW On Track For 5th Straight Losing Week"

Iran Sanctions And OPEC's Deliberations Have Failed To Lift Oil Prices

OPEC+ members met over the weekend to discuss the oil market and the possible actions they may take at the next OPEC meetings scheduled for June 25th and 26th. OPEC’s press release reported:

Following its 14th Meeting, which took place on 19 May 2019, in Jeddah, the Kingdom of Saudi Arabia, the Joint Ministerial Monitoring Committee (JMMC) has reaffirmed its commitment to achieving a balanced market and working towards oil market stability on a sustainable basis with solid fundamentals.”

After the meeting, ministers spoke with reporters. According to reporting by CNBC:

Saudi Arabia’s influential oil minister, Khalid al-Falih, warned that global crude stockpiles are rising, threatening to swamp the world in oil and cause prices to collapse. Overall, the market is in a delicate situation. On the one hand, there is a lot of concern — and we acknowledge it — about disruptions and sanctions and supply interruptions. But on the other hand, we see inventories rising. We see plentiful supply around the world, which means we think, all in all, we should be in a comfortable situation in the weeks and months to come.” Continue reading "Iran Sanctions And OPEC's Deliberations Have Failed To Lift Oil Prices"

Semiconductor Sector Drags Market Lower

Hello traders everywhere. Semiconductor stocks fell after the ruling that Qualcomm used its dominant position to exact excessive licensing fees, a decision that could shake up the broader smartphone industry. Qualcomm (QCOM) fell -12%, while other chip stocks also dropped which in-turn has pulled the overall market as we head into afternoon trading.

Today's declines followed a Tuesday rebound for chip stocks after the White House granted temporary exemptions to an export blacklist against Huawei Technologies, potentially easing U.S.-China tensions as the two sides seek to get trade talks back on track. Some analysts expect trade-related swings to continue until investors get more clarity on escalating tariff threats by both sides.

Semiconductor

On the trade war front, Treasury Secretary Steven Mnuchin told CNBC's Ylan Mui that a trip to Beijing to retake trade negotiations has not been scheduled yet. This lowered hope of a speedy resolution to the U.S.- China trade war.

President Donald Trump followed through with his threat to increase tariffs on $200 billion in Chinese goods from 10% to 25% earlier this month. China immediately responded by upping the tariffs on $60 billion of U.S. goods to as high as 25%.

Key Levels To Watch This Week:

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