Can the Cineworld Share Price Break Past the 26p Mark This Week?

Summary:

Cineworld share price is trading higher for the second straight session. It is up 3.56% on the day and seeks to add to Friday's 1.6% gain

Following the steep decline of Thursday, 12 May, the Cineworld share price is trading higher for the second straight session. It is up 3.56% on the day and seeks to add to Friday’s 1.6% gain. The Cineworld share price has struggled to gain momentum following the company’s successful attempt at securing waivers for debt repayments to former shareholders of Regal Entertainment.

Cineworld had acquired this company in 2017, but a section of shareholders was unhappy with the sale price of $23 per share and was seeking additional compensation. Cineworld Entertainment had agreed to pay the shareholders $170m but had to seek a payment delay in February 2022 to enable it to boost its liquidity position.

Cineworld presently has a debt profile that stood at $8.9 billion as of December 2021. Part of this debt was incurred to finance the Regal takeover. However, the company’s credit rating is deficient, and it stands at risk of defaulting on its obligations. In addition, after a botched merger, a court also ordered Cineworld to pay Canada’s Cineplex a hefty compensation.

With Cineworld still grappling with maximizing revenue from the belated reopening of its theatres, these factors continue to constitute headwinds to the recovery of the Cineworld share price. Cineworld could breach the 26p mark, but this rally would only present new selling opportunities if the current fundamentals prevail.

The 23.49 support level appears to be holding firm after resisting further attempts at pushing below this point last week. It is also the site of the intraday support from which the bounce has occurred. The bulls need additional momentum to target the 26.63 resistance. A break of this resistance sends the price action towards the 31.72 barrier (26 April and 3 May highs).

Additional barriers to the north are found at the 35.07 price mark (8 February low and 25 March high) and the 39.95 price mark, where the previous highs of 13 January and 1 February are seen.

On the flip side, further price deterioration towards 19.78 (18 March 2020 low) occurs if the 23.49 support (16/30 October 2020 double bottom) is broken. Below this level, additional support is seen at 15.55, where the previous low of 5 October 2020 is found.