AMC stock analysis: could it rally to $60?
AMC's share price could be on the path to recovery
- AMC share-price technical analysis: weekly chart
- AMC share price technical analysis: daily chart
- AMC stock: buy or sell at these levels?
The price of AMC Entertainment (NYSE: AMC) stock has witnessed strong rallies and equally sharp declines in 2021. On 20 July the stock surged 24.5%, and it was the second most actively traded stock on the US exchanges, with 166 million shares changing hands.
The latest rally could have been ignited by the news of AMC taking over the leases of two cinemas in California, The Grove shopping complex and the Americana at Brand. Both these locations were previously operated by Pacific Theatres and were among the highest-grossing cinema locations in the Los Angeles area. These cinemas are expected to restart operations in August.
AMC said in a press release on 12 July that more than 3.2 million people worldwide had visited its theatres between 8 and 11 July, making it the busiest post-COVID reopening weekend so far. The figures show there is still a strong appetite for watching movies in theatres.
Several large film franchises, such as Spiderman, Transformers and James Bond are expected to release completed films or restart production of new films that were halted because of the coronavirus pandemic. This could further improve the attendance in theatres, boosting AMC’s operational performance over the next year.
However, the rise in COVID cases among the unvaccinated because of the highly contagious Delta variant, poses a risk to recovery. Without a steady flow of income, AMC may find it difficult to manage its more than $5.5bn of debt.
Could AMC pull off a recovery? Will AMC stock go up or down? Read our AMC stock analysis to find out more.
AMC share-price technical analysis: weekly chart
The sharp rally had pushed the relative strength index (RSI) to over 89 levels in mid-June, according to data on Currency.com, a sign that the uptrend was overextended. That resulted in profit-booking, pulling the price down to the 20-week exponential moving average (EMA).
In an uptrend, traders often buy on dips to the 20-week EMA. The strong rebound off this EMA indicates that sentiment remains positive and investors are accumulating at lower levels.
The buyers may again try to push the price to $60, which could act as a stiff resistance. If the price turns down from this level, the stock may consolidate its massive gains for a few weeks.
What is your sentiment on AMC?
A break-out and close above $60 could challenge the 52-week high at $75.66. This positive view will be invalidated if the price turns down and plummets below the 20-week EMA.
AMC share price technical analysis: daily chart
AMC’s share price has been in a downtrend since topping out at $72.62 on 2 June. The bulls arrested the decline at $32.14 on 15 July and are attempting to stage a recovery.
The strong 24.38% up-move on 20 July has pushed the price back above the 50-day simple moving average (SMA). However, the rally is likely to hit a wall at the downtrend line.
If the price turns down from this resistance, the stock could extend its stay inside the falling wedge pattern for a few more days.
On the other hand, if bulls thrust the price above the downtrend line, the stock may rally to the $60 to $64 resistance zone. The bears are likely to defend this zone aggressively but if bulls can arrest the subsequent decline above the 20-day EMA, it will signal strength.
A breakdown and close below the support line of the wedge could start the next leg of the downtrend.
AMC stock: buy or sell at these levels?
The AMC stock price is trading inside a falling wedge pattern. A break-out and close above the wedge could open the doors for a rally to $60. Conversely, traders may expect further downside if the $30 support cracks.
The views expressed in this article are those of the writer and do not represent trading advice. Always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money.