Grab the Porpoise by the Horns! SeaWorld’s Sinking! (SEAS)

Hard to get excited about flying sea creatures and paying hard-earned cash to get yourself drenched.

But SeaWorld Entertainment (NASDAQ:SEAS) makes a business of exactly that.

If you can call it a business…

Truth is, SEAS has run into some rough waters of late, as we expected they would.  So you can imagine our salty cravings just eyeballing an opportunity to sail a windy profit from her soon-to-be capsized wreck.

Now, hold on to your jibs, gentlemen, as we walk you through the fundamentals here.

Or, in this case, what you might call a fundamental lack.

Get a load –

• The stock has no P/E,
• No P/B, and
• No dividend.

But that never hurt anyone in today’s heady investment climate.

Nor did –

• A decline of 461.80% in earnings this year, and
• Quarter over quarter declines in Sales and Earnings of 48.30% and 88.10%.

Unhand me, brute!  You smell like a squid!

The big splash seen on the chart of roughly a month back – when the stock spouted higher by better than 50% – was a result of an announcement that several SeaWorld locations would soon be opening.

That’s all.

Opening.

Not advance killer-whale ticket sales.

Just reopening.

Hmph.

Here’s the daily chart –

Technically, pay attention to –

1. A strongly overbought RSI reading at the beginning of the month (in green), followed by
2. A MACD rollover, now nearly complete – both of which augur poorly for the weeks ahead.
3. Add to that, numerous price gaps in the last six weeks’ action (in blue), all of which we believe will be filled, and
4. Last week’s all-time highs, that lifted price to better than 100% above her long-term moving averages.

Not a sea cow to be milked for cash, in our opinion.

And the weekly…?

1. Here, we have an extended weekly overbought signal to go with the daily (in green), the pair of which should make every mariner shudder,
2. A MACD indicator that bespeaks our earlier comment on how far price has now separated from her long term MAs,
3. Parabolic price action (in blue), precursor to a stall, and
4. Fibonacci retracement marks at 25 and 35 (in purple), which align quite cordially with the gaps shown in the daily chart, above.

We foresee a decline to at least $35, and we therefore urge the following –

A Jew and His Money recommends you consider setting the SEAS June 18^th 55 synthetic short* for a debit of $4.70 (4.70/9.40).  Set a STOP buy on the stock at 55.

[*Sell the 55 CALL and buy the 55 PUT.]

Rationale:

Maximum loss – with proper STOPs emplaced – is $4.70.

Maximum gain is unlimited.

Breakeven on the trade is $50.30 (just 0.8% below the current price of $50.74).

As per usual, should the STOP buy be triggered, a new STOP sell should be entered at the same level (55) to keep the trade square.  Should that be executed, a new STOP buy at 55 should be re-set.

A STOP should always be in place at 55 until we close the trade.

With kind regards, and Chodesh Tov!

Hugh L. O’Haynew

Follow @HughLOHaynew