I will start today’s write up about AMC Entertainment (NYSE:AMC) stock, by sharing a few sobering stats. This has nothing to do with its fundamental prospects, and all to do with stock performance.
The goal is to shed some high level perspective without any judgment. This is an important part of investment research of any stock. Comparing current with past levels, so we can better ascertain the future opportunities. Spoiler alert, I am not sharing a bearish trade setup today.
The highest yearly close for AMC stock was in 2016 at $33.70. The second closest one was its second year of existence in 2014 at $26.20. The current price is almost exactly in the middle, so they are still in contention. The shocking metric is that the current 52 week low is $1.91. Somehow investors found value there and then took it to da moon.
I am not here to judge because I will only still trade the action without committing for an investment. Ranges this wide do not inspire confidence to hold long term. AMC’s second widest yearly range was in 2017. It spanned from $10.80 to $35, and the three following years were catastrophes.
Volatility This Wild Lacks Confidence
Such whipsaw action casts doubt over the long-term commitment of the buyers. Nevertheless this is not a negative write-up about AMC stock. The weekly chart suggests that there are buyers lurking near $24 per share. This has been in contention since the beginning, but more so since this past May. Moreover, there now are new resistance levels with which to contend on rebounds.
The indices stumbled last week and AMC did not escape the drubbing. From high to low it lost 33% of its value. This week the action has been constructive recovering exactly half. Usually that is where sellers start to emerge to form resistance.
So far we’ve discussed nothing but technicals and that’s how it’s going to go today. I do not have much faith in a rosy fundamental outlook.
So I don’t sound judgy, I will restrict almost the entire debate over price levels rather than P&L performance. None of my points today are of opinion because I make them with specific stats. Support and resistance lines on the charts are data facts not conjecture.
Perfect AMC Stock Comments
Before you tune out the discussion, consider my recent record on that. On Oct. 8 I stated that AMC stock makes for a good trade but a risky investment. Two specific comments from then are at the heart of today’s takeaway. I specifically noted that the sellers will be lurking above $44. And that the buyers have consistently showed up around $33 per share.
Since then, there have been two technical developments that are not bullish. The $44 level prediction held incredibly accurate, so that was not hocus pocus. In addition, the buyers failed to hold the $33 level. Sadly, often enough prior support becomes forward resistance. Therefore the bulls need a lot of effort to reclaim that level. The sellers conversely will try to hold it as resistance into 2022.
Meanwhile, the bulls will need to defend last week’s lows ferociously. If AMC stock falls below $25.40, it could trigger a large bearish pattern with ominous results.
Judging a stock’s price action is independent of the company prospects. Fans who want da moon can hold it until then or a crash. I am agnostic to that, and my primary concerns are short-term profits from the action around my lines. When we lack fundamental metrics, the technical analysis serves us well. Those who turn the blind eye to actual data are knowingly putting themselves at a disadvantage. I’ve traded long enough to know that this doesn’t work out well in the long run.
Management Has the Reins
The famous movie line says “show me the money” and I will then change my mind. I doubted Tesla (NASDAQ:TSLA) until it actually delivered $6 billion from operations. I will give the same courtesy to AMC stock if management steps up.
After a double top in 2016, it lost more than 80% of its value. That is a fact, not opinion. Therefore, the stock was in trouble before the global lockdown. Their revenues are now one third of what they were three years ago. Moreover, they are losing $2 billion in the trailing 12 months. I give them credit that the pandemic severely disrupted their business.
I am optimistic that the world will not shut down again, and that the reversion to normalcy will continue. However, it is up to management to change opinions by showing us how they’re going to adapt the business.
On the date of publication, Nicolas Chahine 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.
Nicolas Chahine is the managing director of SellSpreads.com.