Imax

IMAX

Company. IMAX "is one of the world's leading entertainment technology companies, with particular emphasis on film and digital imaging technologies including 3D, post-production and digital projection. IMAX is a fully-integrated, out-of-home entertainment enterprise with activities ranging from the design, leasing, marketing, maintenance, and operation of IMAX® theatre systems to film development, production, post-production and distribution of large-format films. IMAX also designs and manufactures cameras, projectors and consistently commits significant funding to ongoing research and development." (company website)

Buy. I've had my eye on IMAX for many months, but always found some reason not to buy it. Yesterday, IMAX reported that it had swung back to profitability, turning in 5¢ per share earnings compared to a loss the year before of 7¢. The Street was expecting only 1¢ earnings.

IMAX has been trending down for most of the past year (see sidebar). There was a double bottom in May and August, and yesterday's spurt brings it back over the $6 level of June and September. With these most recent earnings, I expect an upward trend to solidify.

Sell. After jumping $1 during the past week, IMAX opened higher on Friday but then began to skid lower. When it dropped to about $8.20 I decided to protect my gains and entered an order to sell if the price dropped to $8. This would still give me $1.50 profit per share, quite respectable. Although IMAX ended the day just below $8.20 it got low enough to trigger my order.

I left more than $1.75 per share on the table compared to the high of the day. On the other hand, there was a risk that some rumor might send the stock into freefall, and it was better to protect still-reasonable profits than to risk losing them entirely.

I think Friday's sell-off was just profit-taking right after the holiday. On the other hand, IMAX has been out ahead of the 50-moving average for quite a while, and it would not be surprising to see it pull back briefly.