AMC Entertainment Reaches For The Treetops: Can The Retail Favorite Reclaim This Key Level?

Zinger Key Points
  • AMC's short interest has been increasing, increasing the chance of a short squeeze.
  • Bullish traders want to see AMC reclaim the 200-day SMA over the coming trading days.

AMC Entertainment Holdings, Inc AMC opened slightly lower on Thursday before surging over 25% at one point to tag the 200-day simple moving average (SMA).

Interest from retail investors looks to be returning, causing AMC to trend across social media.

Like GameStop Corporation GME, AMC’s short interest as been increasing, making the chance of a short squeeze more likely. Both stocks are approaching the two-year anniversary of the epic short squeeze that brought AMC and GameStop fame in January 2021.

As of Nov. 15, 111.53 million AMC shares were held short, meaning 21.63% of the float, compared to 104.36 million shares held short as of Oct. 13. Comparatively, short interest in GameStop is sitting at about 20.52%.

For a strong short squeeze to take place, AMC will need to reclaim the 200-day SMA as support, which would push the stock into a new bull cycle. If AMC can reclaim the bellwether indicator and remain trading above the area for a period of time, the 50-day SMA will cross above the 200-day, causing a golden cross to form.

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The AMC Chart: When a golden cross forms on a chart it indicates strong buying interest and can signal a long-term reversal is in the cards. The 200-day SMA also acts as strong resistance, making it difficult for a golden cross to occur.

  • Thursday’s steep increase caused AMC to break up bullishly from a descending channel pattern on the daily chart, which coincided with a bull flag pattern break on the weekly chart. The measured move of the break of the pattern is about 56%, which suggests AMC could surge up toward $10.90, which would pop the stock over the 200-day SMA.
  • If AMC closes the trading day with a significant upper wick, it could indicate lower prices will come on Friday. If that happens, the lower prices could form an inside bar pattern, which would lean bullish for next week.
  • If AMC trades higher on Friday and reclaims the 200-day SMA over the next few days, the stock’s relative strength index will reach into overbought territory. Traders can watch for a potential bull flag to form just below or just above the 200-day SMA for a possible entry if that happens.
  • AMC has resistance above at $8.51 and $9.90 and support below at $7.47 and $6.63.

Photo via Shutterstock. 

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