Here's Why AMC Entertainment Stock Looks Set To Go Bananas

Zinger Key Points
  • If AMC doesn't trade higher on Tuesday, the stock may form an inside bar to consolidate Monday's surging prices.
  • AMC looks set to trade higher still but traders and investors should note the S&P 500 remains in an official bear market.

AMC Entertainment Holdings, Inc AMC was down almost 4% Tuesday after a big bullish day on Monday saw the stock close up 13.31% higher.

"Top Gun: Maverick," has brought in more than $1 billion at the global box office since it was released on May 27, becoming the most successful film of Tom Cruise’s career, 36 years after the original “Top Gun” was released. AMC CEO Adam Aron took to Twitter on Sunday to revel in the film’s success and write, “who in the ---- can still say movie theatres are dead and have no future?”

AMC also received a boost on Monday due to being added to the Russell 1000 index after the markets closed on Friday. In order for a company to graduate from the Russell 2000 to the Russell 1000, it must have a market cap of at least $7.3 billion as of the cutoff date on May 6. Thanks largely to AMC’s massive retail following and promotion, the stock was promoted to the more exclusive ETF with a $7.5 billion market cap.

Adding to the fundamental reasons for AMC’s surge on Monday, the stock had technical reasons for a reversal to the upside, because between May 31 and Friday, AMC had settled itself into a head-and-shoulders pattern on the daily chart.

AMC looks set to trade higher still but traders and investors should note the S&P 500 remains in an official bear market, which can hamper bullish moves on individual stocks.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The AMC Chart: AMC’s head-and-shoulders pattern developed with the left shoulder between the dates of May 31 and June 8, the head between June 9 and June 21 and the smaller right shoulder between Wednesday and Friday of last week. On Monday, AMC reacted to the pattern and broke up bullishly from the downward sloping neckline on higher-than-average volume, which indicates the pattern was recognized.

When AMC reached a low of $11.09 on June 13 and retested the level on the following trading day, the stock also printed a bullish double bottom pattern and reversed course into an uptrend. The most recent higher low within that pattern was printed on Thursday at $11.44 and the most recent confirmed higher high was formed at the $13.22 level the day prior.

On Monday, AMC rallied up above the most recent higher high and printed a big bullish Marubozu candlestick, which could indicate higher prices will come again on Tuesday. An equally likely scenario is that AMC will print an inside bar pattern to consolidate Monday’s big move.

Eventually, AMC will need to retrace lower to print its next higher low and traders and investors who aren’t already in a position will want to see the stock print a bullish reversal candlestick above $11.50. Bearish traders will want to see the stock drop below that level to negate the uptrend and push the stock down under the sloping neckline of the head-and-shoulders.

AMC has resistance above at $14.68 and $17.07 and support below at $12.22 and $9.80.

See Also: Hedge Fund Manager Taunts Apes With AMC Short Position: 'I Dare All The Meme Stock Maniacs To Try To Hurt Us'

Photo: Created with an image from Valerie Reneé on flickr

Posted In: MoversTrading Ideas

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.