Reader Question:

Six Flags (Symbol: SIX) had been hammered in 2007. Has everyone jumped ship or is there more downside?

Financial Rebel Answer:

First, it’s foolish to look for a bottom. The bottom is $0. Instead, look for a stock that has bottomed and is recovering.

As to Six Flags, I’ve been following this stock for quite some time and I’ve made money with it. Back when “the accident” occurred, I knew it was time to get out. Since that point, the stock has been down.

Honestly, I don’t like the way the company handled the situation. I got the impression that they were arrogant and “young” business wise.

As recent as August 2, you could have gotten into Six for around $3.20 per share. Monday it closed at $3.42—a 7% increase.

It could be some time before Six rebounds—2-3 years perhaps. I expect we’ll see Six back at the $3.20-$3.30 level soon enough.

The stock is extremely volatile right now. It has nearly double its three-month average volume—4,637,200 daily, which is up from 2,582,400 daily.

My take on this stock is that it’s a trade for those with the guts and speculative capital. I wouldn’t sink my retirement money into it.

Six was around $6 per share one month ago. I’d say it’s current channel is $3.20 - $3.60. Again, be careful. If it losses more support, the next stop could be under $3 per share.

As of the end of July, Six had about 40% of its outstanding shares shorted.