AMC retains most of Thursday’s 15% rally

  • AMC Entertainment brought back $5 on Tuesdays to boost ticket sales.
  • AMC stock has been following an ascending trendline as support for two months.
  • CEO Adam Aron led the charge with a tweet about an upcoming short squeeze.

Action AMC Entertainment (AMC) started Friday down 1% at $14.34. This is actually a positive sign after AMC’s impressive rally in the previous session. AMC stock soared 15.2% on Thursday to close at $14.48. The main spark of the fire was caused by CEO Adam Aron hinting at a short squeeze coming. AMC stock was helped by news that GameStop (GME) was attempting a stock split, and when one meme stock rallies, the others are often not far behind. AMC also announced a date for its next quarterly earnings presentation.

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AMC stock news: Short squeeze ahead?

Adam Aron, CEO of AMC led most of Thursday’s rally with a single tweet:

This actually amounts to a comment by Arron on the May 9 earnings call: “We are constantly exploring the smartest courses of action, and I promise you we will pounce, but only when the time is right.” Most observers think this means jumping on short sellers to drive up the stock price by buying large amounts of short-term buy contracts at the same time.

So here it is, friends. The AMC stock short squeeze arrives but not before August 4th. Could it be the legendary MOASS (Mother of all Short Squeezes) that the Reddit gangsters prophesied?

GameStop announced midweek that it would undergo a stock split later this month. The video game retailer, which alongside AMC was a major player WallStreetBets pump in January 2021 that led to the collapse of hedge fund Melvin Capital, will give shareholders four shares for each they hold at the close of trading on July 18. Because stock splits make it easier to buy call options (call option contracts are sold in groups of 100 shares), GME stock split should make it easier for retail traders to buy calls and thus produce more extreme short presses. By mid-June, AMC and GME had about 22% of their floats sold short.

The stock split the news helped GME-equities rally of 15.1%, but strangely AMC rallied even more on Thursday to close up 15.2%. The only reason for this seems to be that the the same traders bullish on GME are also bullish on AMC and decided to make it a “twofer”.

The only other news published by AMC Entertainment Thursday was due to schedule its second fiscal quarter after the market closed on August 4. Wall Street is forecasting an adjusted earnings loss of -$0.19 per share on revenue of $1.18 billion.

AMC Action also brought in $5 on Tuesdays to boost attendance. Although this does not apply to some premium offerings like IMAX, $5 Tuesdays tend to attract large numbers of otherwise infrequent patrons.

AMC Stock Forecast: Resistance Around $20

AMC Action followed an ascending trendline that began on May 12 almost two months ago. For what it’s worth, it’s impressive. This shows that there is enough belief in this beleaguered name that is accumulating shares (buying the dip). The moving average convergence divergence has also topped the signal line (orange) since May 18th. These are two rather positive details. The third element of optimism comes from the fact that the MACD exceeds the zero threshold. This piece of evidence is enough to make me believe that an even bigger rally is in the works (but probably not before August 4!).

There remains a supply zone of $19.34 to $20.96 which should provide resistance if AMC Action made in this part of the country. This price region was tenacious in February and March.

AMC stock daily chart

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Karen J. Nelson