You Ask, We Analyze: Why AMC Entertainment Stock Could Turn Heads on a Break From This Pattern

December 1st, 2021

Awake Goy

On Sunday evening, Benzinga asked its followers on Twitter what stock they are buying at the open on Monday? From the replies Benzinga selected one ticker for technical analysis.

@housepincher, @cj_cady, @PrestonHillber2, @sjsl24, and @alberto92445610 are buying AMC Entertainment Holdings Inc.

On Nov. 26, AMC CEO Adam Aron took to Twitter to announce, “When you hear our big news on Sunday, you will want to join AMC Stubs Premiere.” On Sunday, the theatre chain announced its plans to delve into the non-fungible token space, in partnership with Sony Group Corp., and giveaway 86,000 NFTs to celebrate the Dec. 16 release of the movie “Spider-Man: No Way Home.”

In the premarket on Monday, AMC was trading slightly higher following the overall markets, which were bouncing after a bearish Friday that saw the SPDR S&P 500 close down 2.23 percent. As of late, AMC has lacked the volatility due to low trading volume but if the stock can break from this bullish pattern massive trader and investor interest could be set to return.

AMC Chart

AMC hit a new all-time high of $72.62 on June 2 and has since fallen into a possible long-term pennant pattern on the daily chart with the monthly and weekly trading range tightening significantly. On Friday, AMC fell down to test the bottom ascending trendline of the pattern and bounced, which indicates the trendline is a recognized area of support.

AMC is set to break from the pennant prior to Jan. 7 when the stock will meet the apex of the pattern. When the stock breaks either up or down from the pennant, traders and investors will want to watch for high volume to gauge whether the pattern was recognized.

The stock is currently trading in a downtrend within the pennant pattern with the most recent lower high printed on Nov. 22 at $42.99 and the most recent lower low created on Friday at $36.13. For the trend to change, AMC will need to climb up to at least the $43 area over the coming days.

The lack of volatility in AMC is due to the lack of volume, which has been steadily decreasing since Aug. 24 when the stock shot up almost 30 percent higher intraday. On Friday, 19.73 million shares exchanged hands compared to the 10-day average of 26.52, which indicates there is not a high level of trader and investor interest at this time.

AMC is trading below the eight-day and 21-day exponential moving averages (EMAs) and on Friday the eight-day EMA crossed below the 21-day, both of which are bearish indicators. The stock is also trading below the 50-day simple moving average, which indicates longer-term sentiment is bearish.

Bulls want to see big bullish volume push AMC up to make a higher high and negate the downtrend. If the stock is able to pop up above the level, AMC could break up through the descending trendline of the pennant pattern. There is resistance above at $39.07 and $43.33.

Bears want to see AMC continue to trade lower in the downtrend and print a lower low below $36.13. If the stock falls below the level, bearish traders can watch for high volume to come in and push the stock down through the pennant. The stock has support below at $35.59 and $31.81.