Shares of Cineplex Inc (TSX:CGX) are sinking. The movie theatre operator is struggling amid the COVID-19 pandemic and its stock has fallen into oversold territory, again.
Relative Strength Index (RSI) is a technical indicator that helps gauge a stock’s momentum, and typically looks at the past few weeks. When the RSI falls below 30, that means there’s been excessive selling. In Cineplex’s case – the RSI’s fallen to below 20.
It recently hit a new 52-week low of $4.52 and there’s little reason for optimism at this point. As COVID-19 cases continue to climb, there’s renewed concern. In some parts of Ontario, the government is going back to shutting down certain businesses – including movie theatres. In the Toronto, Ottawa, and Peel Region, which the province has identified as COVID-19 hotspots, movie theatres won’t be permitted to operate.
And that’s just Ontario, as we’re arguably in a second wave of COVID-19, more provinces could follow suit and make similar moves. That’s tough news for Cineplex, which fell more than 6% on Friday on the news. It was in late August that it reopened its theatres across the country and now it’s back into a situation where lockdowns could weigh heavily on its future.
There’s significant risk investing in Cineplex today as the business was already in trouble operating at reduced capacity. Facing shutdowns in three key areas of the country and possibly more means there could be more tough times ahead. Despite its low price, this is a stock investors should stay far away from.