Marvel Facing Hulk-Like Resistance

07/02/04 07:55:42 AM

by Kevin Hopson

A break of resistance at the $20.00 level and Marvel could be off to the races.

Security: MVL
Position: Hold

If you remember back when you were a kid, and some of us still are, you may recall Marvel Enterprises (MVL). This character-based entertainment company has brought us the likes of X-Men, Spider-Man, and The Incredible Hulk, just to name a few. Though Marvel is best known for its comic book publishing business, some people fail to realize that the company's primary operation (from a money-making standpoint) is its licensing business. In other words, Marvel derives most of its revenues from licensing agreements, which come from character-based theatrical movies, DVDs, toys and video games.

In early June, Marvel retired the rest of its outstanding senior notes, meaning that the company is now debt-free. Additionally, the company said it had over $150.0M in cash and equivalents at the time and that this cash number will rise to roughly $200.0M by year-end. Furthermore, Marvel raised its 2004 full-year earnings guidance back in May. Despite all of the good news, the stock has failed to make much headway. Part of this has been due to the massive amount of shorting in the stock. Short interest as of June 7 was roughly 14.8M shares, which is over 12.0x the stock's average daily volume. As a result, there is a lot of potential buying pressure to push the stock higher down the road.

Graphic provided by: Stockcharts.com.

In the meantime, Marvel is facing stiff resistance around the $20.00 level. Looking at the six-month chart, you will notice that the stock's 50-day, 100-day and 150-day moving averages have all converged in the $19.80 to $20.15 range. Additionally, the 1A channel line - which recently turned back prices - comes into play around the $20.20 level. If that is not enough, there is a significant amount of call open interest in the July 20 calls. Since the sellers of these calls benefit by the contracts expiring out-of-the-money, there will be incentive to keep prices below the $20.00 level in the near-term. As a result, I would consider a break of resistance here a signal to go long. If Marvel can overcome the $20.00 level, the stock could see a quick move up to $22.00, the site of April's high and the 2A channel line. In the meantime, I would continue to hold.

Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

	Glen Allen, VA
E-mail address:	hopson_1@yahoo.com

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Marvel Facing Hulk-Like Resistance

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