AMC held back most of Thursday’s 15% rally

  • AMC Entertainment returned $5 on Tuesday to boost ticket sales.
  • AMC shares have been trending up as support for two months.
  • CEO Adam Aaron led the charge with a tweet about an upcoming short-cut.

Shares of AMC Entertainment (AMC). started Friday down 1% to $14.34. This is actually a positive sign after AMC’s impressive rally in the previous session. AMC shares jumped 15.2% on Thursday to close at $14.48. The main spark for the fire was sparked by CEO Adam Aron, hinting at a short shrink ahead. AMC’s stock was helped by news that GameStop ( GME ) was trying to split the stock, and when one meme stock goes up, others often don’t follow. AMC also announced a date for its next quarterly earnings presentation.

Read also: Apple stock deep dive: AAPL price target $100 on declining 2023 earnings

AMC Stock News: Short Contraction Ahead?

AMC CEO Adam Aron set most of Thursday’s rally in motion with a single tweet:

This actually goes back to a comment from to on the May 9 earnings call: “We’re constantly exploring the smartest courses of action, and I promise you we will pounce, but only when the time is right.” Most observers assume that means pouncing on short sellers , to boost the stock price by buying large amounts of short-term call contracts.

There you have it folks. The AMC shares short shrift it’s coming, but not until August 4th. Could it be the legendary MOASS (the mother of all short squeezes) that Reddit gangsters prophesied?

GameStop announced midweek that it will undergo a stock split later this month. The video game retailer that, along with AMC, was a staple WallStreetBets pump in January 2021 that led to the collapse of hedge fund Melvin Capital will give shareholders four shares for every one they own at the close of trading on July 18. Because stock splits make it easier to buy calls (call contracts are sold in groups of 100 shares), The GME stock split should make it easier for retailers to buy calls and thus produce more extreme short squeezes. As of mid-June, both AMC and GME had about 22% of their bonds sold short.

The stock split the news helped Shares of GME rallied 15.1%, but oddly, AMC rallied further on Thursday to close up 15.2%. The only reason for this seems to be that the same traders bullish on GME are also bullish on AMC and decided to make it a “couple”.

The only other news published by AMC Entertainment on Thursday was scheduled to schedule its fiscal second quarter for after the market closes on Aug. 4. Wall Street had forecast an adjusted earnings loss of -$0.19 per share on revenue of $1.18 billion.

AMC Shares also returned $5 on Tuesdays to boost attendance. While it doesn’t apply to certain premium offerings like IMAX, $5 Tuesdays tend to attract a large number of otherwise infrequent customers.

AMC Stock Outlook: Resistance around $20

AMC Shares is moving along an ascending lower trendline that began on May 12, nearly two months ago. For what it’s worth, that’s impressive. This shows that there is enough faith in this beleaguered name that it is accumulating shares (buying the dip). The moving average divergence also leads the May 18 signal line (orange). Those are two pretty positive details. The third dose of optimism comes from the rise of the MACD above the zero threshold. This evidence is enough to lead me to believe that an even bigger rally is in the works (but probably not until August 4th!).

Remaining power zone from $19.34 to $20.96 which should provide resistance if AMC Shares reaches the other side of the forest. This price region was stubborn in February and March.

AMC Stock Daily Chart

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