Why AMC Entertainment Stock Could Go Ape as It Nears Breakout

By Benzinga
Benzinga
Benzinga
October 19, 2021 Updated: October 19, 2021

Retail traders ‘hodling’ AMC Entertainment Holdings Inc. stock celebrated in a number of subreddits on Monday after a 7-foot-tall statue of Harambe was positioned facing Wall Street’s charging bull. The statue, depicting a 17-year-old gorilla who died in 2016, was installed by Sapien.Network to represent wealth disparity.

Investors of AMC and GameStop Corporation have been diamond handing and accumulating shares of the stocks since, at least, the end of 2020. Their mission is to fight for increased fairness and transparency on Wall Street.

Despite many short sellers believing AMC is overvalued and will eventually plummet, the stock has held strong above the $30 range since June 1. On Monday and Tuesday, bullish options activity continued to increase, indicating institutions may believe the stock is about to fly higher.

AMC has been trading in a large pennant on the daily chart since June 2 and is set to meet the apex of the formation on Nov. 4. On Tuesday morning the stock attempted to break up bullishly from the pattern, but rejected and wicked from the descending upper trendline.

Within the pennant, AMC has been trading in an uptrend since Sept. 30 when the stock tested the lower ascending trendline of the pattern and bounced. It has since tested the lower trendline four additional times and bounced, which indicates the pattern is being recognized.

On Tuesday AMC was in the process of printing either a doji or inverted hammer candlestick, which may indicate the stock needs to create a higher low within the pennant before making another attempt to break up bullishly from it. The candle is being created on low volume, which indicates the stock is consolidating the 17 percent move higher made between Oct. 13 and Oct. 18.

AMC is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. The stock is also trading above the 200-day simple moving average, which indicates overall sentiment in AMC is bullish.

Bulls want to see continued consolidation on low volume and then for big bullish volume to come in and break AMC up above the upper descending trendline of the pennant. There is resistance above at $43.33 and $48.52.

Bears want to see big bearish volume come in and drive AMC down below a support level at $39.07 and toward the bottom trendline of the pennant. If the stock falls below the pennant pattern on high bearish volume there is support near the $35 mark, and below the level there is further support at $31.81.

By Melanie Schaffer

© 2021 The Epoch Times. The Epoch Times does not provide investment advice. All rights reserved.

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