- AMC stock falls sharply on Wednesday to $43.69.
- Stock loses over 7% after looking strong and set to break $48.
- AMC is now just about holding onto the bullish trend.
AMC shares suffered on Wednesday as the meme stock fell by a fairly hefty 7% to close at $43.69. In most cases, 7% would be seen as a collapse but this is a meme stock we are talking about so that 7% needs to be put into context. For example, only as recently as August 24, AMC rallied over 20% to set up the current bullish trend that AMC stock is now clinging to. The catalyst mentioned across most media outlets is a bearish report by Macquarie which cut its rating of AMC stock to underperform. In the view of this author that seems an unlikely reason. Wall Street analysts have not exactly been up to date with the meme stock madness with price targets reflecting the underlying fundamentals rather than the short squeeze phenomenon. Correctly so, those analysts use accounting principles to value the underlying business. The average Wall Street rating for AMC we can see from the table below is $5.44, this has not changed for some time, despite the stock price being in the $40’s. Macquarie then is unlikely to have caused the sell-off. There has been a lot of retail options interest in meme stock recently which helped AMC surge by over 20% and GME pop over 27%. This has started to slow meaning underlying stock-buying by options dealers to hedge their positions (gamma hedge) will have also slowed. This is a more plausible explanation.
AMC key statistics
|Market Cap||$22.3 billion|
|Enterprise Value||$36 billion|
|52 week high||$72.62|
|52 week low||$1.91|
|Average Wall Street Rating and Price Target||Sell $5.44|
AMC stock forecast
Whatever the reason the fact is AMC shares dropped yesterday by over 7%. In the process, the stock has dipped to the 9-day moving average. The stock had been trying to break $48 which we felt would provide added momentum as volume dries up from $48 to $58 meaning a move is easier to sustain. All is not lost though with $40 still being the key support to hold the bullish trend. $40 is the breakout level from August 24. If AMC can hold above $40 then it remains in a bullish formation with the Moving Average Convergence Divergence (MACD) crossed into bullish territory and the Relative Strength Index (RSI) remaining healthy but not overbought.
In our view a buy the dip can be tried at $40 with a stop at $37 as there is a large amount of volume here so we would hope the price will not gap lower too quickly. As always please use stop especially in something this volatile. Alternative a break of $48 can also be used as a buy entry with $58 the target and a farily tight stop as a breakout should not go below the breakout level.
IF AMC breaks $37 the next support zone is $29.82.
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