Among its cult followers, for a time, it was a star in 2021. But when it comes to shares of AMC Entertainment (NYSE:AMC) right now, don’t expect an upbeat sequel. Better yet, be smart and prepare for a horror show in AMC stock.
Today let’s look at AMC shares off and on the price chart and why this past year’s popcorn-loving bullish base may want to head for the exits before the curtains come down.
AMC stock. In 2021 and along with shares of GameStop (NYSE:GME), the pair were like Butch Cassidy and the Sundance Kid. They were outlaw stocks and the good guys all rolled into one. That was especially true for AMC’s base Redditor audience of bullish apes.
And as shares of AMC soared a year ago on the back of largely institutional betting too aggressively against the floundering cinema chain, a story of David versus Goliath came to lucrative life for the meme-driven stock influencers.
AMC Stock Sheds
But it’s been a long six months since shares hit $72.62 in June and offered a peak return of 3,320% to its bullish and fervent fans.
Since then, AMC’s ape-friendly CEO Adam Aron has offered plenty of positive box office stats, free popcorn, NFT favors, and other incentives through its Investor Connect program to keep apes hanging in there.
Yet the feel-good story has worn thin with AMC stock shedding nearly 72% over several months including January’s 24% snubbing.
A massive four-fold in dilution, insider selling, broader weak market sentiment for stocks like AMC having something to prove and a general sense Redditors were more lucky gamers, than possessing sustainable diamond hands have all conspired against AMC stock.
Still, some believe a sequel of sorts is possible. And maybe rightfully so.
Multiple capital raises in 2021 have put AMC in a much stronger financial position than it was a year ago. And if the outfit is able to renegotiate debt at better terms, bulls will have a much more durable leg to stand on.
Today though, reasons for AMC stock’s bullish audience to belt out another round of “the show must go on” are looking less sure-footed on the price chart and could be set to scare the daylights out of investors.
Weekly Price Chart
Source: Charts by TradingView
As the illustrated weekly chart of AMC stock reveals, a small double bottom pattern may be forming as shares test the 76% retracement level and last January’s “GME show” high.
The technical situation could be a bullish turn of events for AMC’s bulls. Importantly though, the pattern isn’t without its challenges.
Given AMC’s much larger pattern disappointments and out-of-position stochastics setup, the odds warn of a nearby failure. And frighteningly, that could easily result in a much lower share price before all is said and done.
For investors that are interested in buying AMC stock, I’d strongly suggest waiting for pattern and secondary indicator confirmation.
At the moment that amounts to shares holding this past week’s doji and being able to rally through $23.75 with the backing of a bullish stochastics crossover.
To be fair of course, confirmation of this type is no guarantee of success. Without it though, the chance for AMC shares to continue sliding towards pre-show, single digit stock prices greatly increases in our estimation.
Bottom line and even if those bullish conditions are met on AMC stock’s weekly chart, I’d also strongly suggest complimenting the admission price with an out-of-the-money, intermediate-term bull call spread in lieu of shares.
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.