As they say, the show must go on. And when it comes to today’s AMC Entertainment (NYSE:AMC) in front of earnings, that idea is winning investors over. AMC stock opened at $42.48 on Nov. 8, and it reports earnings after close on the same day.
Today let’s examine what’s required to keep AMC stock’s bullish drivers intact and what the price of admission for one risk-adjusted determination aligned with those findings looks like.
This past week was a blockbuster of sorts for AMC shares. Along with a buoyant five day stretch for Wall Street riding a ‘just right’ Goldilocks tapering narrative by the Fed, the country’s largest cinema chain rallied an impressive and market-leading 17.9%.
Behind AMC’s added fanfare, the stock’s bullish performance was riding news of monthly theater sales for October seeing pre-pandemic levels for the first time since early 2020.
That’s not all that AMC stock bulls are cheering either.
With the release of Warner Bros.’ Dune in late October, there’s mounting evidence big budget movies with standalone theatrical releases — versus the pandemic’s hybrid model offering consumers at-home streaming options — are much better for business.
And today or rather this evening, the curtain on AMC’s Q3 results will be pulled back.
By the numbers, consensus forecasts are pegging a loss of 53 cents per share for the three month period ending in September. At the same time, sales of $708 million are expected.
More palatable like buttered popcorn, the results compare very favorably to the loss of $5.70 per share in the same period last year and meager sales of $119.5 million. And full-year revenue is set to grow 93.3% to $2.48 billion.
Also, despite structural industry challenges even prior to Covid-19, the hybrid model could be making an exit, which would be a benefit to the cinema giant moving forward.
The notorious Reddit audience has, of course, always loved AMC stock. Today it is taking center stage for technical traders, too. Shares are looking to put great big ol’ smiles on the faces of bulls in the weeks ahead.
AMC Stock Monthly Price Chart
Source: Charts by TradingView
November is off to a great start for AMC stock, but it’s also true that looking a gift horse in the mouth is often a big mistake for investors. Yet it’s our contention that a bullish cycle is just about to get underway.
As shown in AMC’s illustrated monthly price chart, shares are currently forming an inside candlestick pattern. But don’t expect that to last. And given what we’re also seeing on this time frame, be prepared for a bullish resolution!
At the moment, with November’s candle also developing in the body of May’s confirmed hammer which successfully tested AMC’s Covid-19-related 62% retracement level and the stock’s prior 2016 all-time-high, bullish investors are presented with a discounted and solid-looking, second attempt entry for buying shares.
To be fair, there’s earnings risk and the potential for an adverse price gap. There’s no getting around the fact that charts are just a tool to be used and never a guarantee of a certain outcome.
Still, with a solid-looking set-up in front of the event, and one that also includes a well-neutralized stochastics indicator on the cusp of crossing over, having the report act as a bullish driver to confirm the monthly bottoming pattern isn’t an unreasonable one.
If we’re correct about a bottom, the prospects for a sequel or at least a sizable rally out of AMC’s five-month long correction into the right side of a possible cup-shaped base is very promising as the stock moves into 2022.
For bullish investors interested in owning AMC stock long through tonight’s earnings release with substantially less risk, I’d suggest a collar.
One such spread which also allows our anticipated basing pattern a harmonious amount of time to build successfully, the price for admission using a fully-hedged February $45/$65 collar looks about right off and on the price chart.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
