AMC Flashes Bullish Reversal Pattern: A Technical Analysis

AMC Entertainment Holdings, Inc AMC was attracting high interest in the WallStreetBets community on Thursday after the stock printed a reversal and closed over 7% higher.

AMC has been trending in a number of trading communities for months due to discrepancies in the stocks underlying statistics and a belief naked shorting is holding AMC down. There’s also a possibility traders see AMC as a reopening play.

Last weekend, AMC reported a post-pandemic attendance record of 3.2 million movie-goers at its cinemas globally although the number is still much lower than pre-pandemic levels.

After retracing over 50% from its record high of $72.62 on June 2, AMC looks set for a move higher.

The AMC Chart: After reaching its new all-time high, AMC appears to have retraced into an ABC wave pattern, according to Elliot Wave Theory. An ABC correction wave can appear at the end of an impulse move and in AMC’s stock the impulse move took place between May 7 and June 2 when the stock skyrocketed 693%.

The ABC correction wave consists of a 5-3-5 pattern within the wave where there are five counts in a zig-zag pattern from the high to the low, three counts from the low to a lower high and then five counts down to a new low. The length of lines A and B is longer and equal while the length of line B is shorter.

The end of the wave also coincides with a support zone at $31.81 and on Thursday, AMC bounced from the area. This, along with the end of an ABC correction, indicates higher prices may come.

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AMC is trading below the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending below the 21-day, which is bearish. The stock is also trading under the 200-day simple moving average, which indicates overall sentiment in the stock is currently bearish. It should be noted AMC’s stock is known to make huge moves in a single day, so could easily recapture the moving averages with a surge in volume.

Bulls want to see bullish continuation volume push AMC back up over a resistance level at $39.71. If it can regain the level as support, it could trade back up toward the $47.91 mark.

Bears want to see the reversal pattern negated and for bearish volume to drop AMC’s stock under support at $31.81. If AMC were to close under that level it could fall all the way back toward the $20 area.

AMC Price Action: AMC Entertainment traded up 1.5% to $36.55 at publciaiton time.

Photo: Tima Miroshnichenko from Pexels