AMC Entertainment AMC was down more than 4% in premarket trading today, erasing much of yesterday’s 7.1% surge in the meme stock favorite. AMC leadership yesterday said admissions were up 15% for the past weekend compared to the same weekend in 2019, and it was one of the top mentions on Reddit for a potential short squeeze.
Volatility in this name has been relatively low lately, with Implied Volatility in only the 27th percentile for the past year – and low volatility can be a precursor to high volatility sparked by a breakout in either direction.
From a technical perspective, price hit yearly lows on May 12 for a roughly 85% loss since the yearly highs on Jun. 18, 2021. But AMC has made higher lows since bottoming out and shares have bounced around the 21-Day Exponential Moving Average for a few weeks, with price halting just below this commonly-followed technical indicator yesterday.
Volume also has been fairly low, coming in below its 50-Day Simple Moving Average in 10 of the past 11 days and suggesting limited conviction in the recent price action. However, this could be the makings of a bullish Ascending Triangle pattern, characterized by an upward trendline along the lows and horizontal resistance, which would be around 16 in this case.
Other indicators paint a picture of indecision, such as the MACD bouncing showing little directional conviction in either way and the Parabolic SAR switching back and forth during the past few weeks. There are several potentially important resistance levels for traders to watch between 14 to 16, including the 50-Day SMA, the 63-Day EMA, and the previous highs from May 31.
For support, traders should watch the lows near 9.70 and be nimble with their stops if things start to slip. If it does break downward, there’s another potential support level in the yearly Linear Regression Line (also known as a line of best fit and suggests fair value) near 9.20.
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