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Buy or go short in AMC? Technical support & resistance

April 5, 2021 14:45
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amc, capital, etoro,

The Reddit Forum made AMC on of the most popular shares to buy in Q1, 2021. But how popular will AMC be among traders in Q2?.

Today, ShortSelling will talk about the latest important news connected with AMC Entertainment Holdings and where this stock price could move in the upcoming period. We look into short selling and buying AMC and where a few support and resistance levels are situated.

AMC Entertainment Holdings owns, operates, or has interests in theatres, and the company is known in some countries as AMC Cinemas or AMC Multi-Cinemas. The company was founded in 1920, and as of March 12, 2021, it operated approximately 1000 theatres and 10,700 screens in the United States and internationally. AMC has the largest share of the U.S. theater market ahead of Regal and Cinemark Theatres, and it is important to say that AMC experienced a major, 300% surge in its share price to a peak of $20.36 in January 2021 (in only one day).

There are lots of rumors that many bullish talks from the popular Reddit WallStreetBets forum influenced this price move as part of a wider series of short squeezes coordinated by the Reddit community. During its fourth-quarter earnings call in March 2021, AMC Entertainment Holdings announced that its revenue had fallen by 88% in Q4, while the main reason for this was the Covid-19 pandemic. This is not a bad company, but shares look way too expensive, and the recent 20% selloff could be the beginning of a much larger downturn.

AMC: A volatile share
AMC shares have advanced from $2 above $20 in January 2021, even though the underlying business didn't perform nearly as well. Many analysts agree that there are plenty of reasons to be bearish on AMC shares at the current stock price, especially if sentiment around the U.S. stock gets worse. AMC Entertainment shares are rated a new sell at Lightshed Partners with a price target of $0.01, while lots of other analysts also think that shares of this company are  “dramatically” overvalued.

“The future of movie-going is not in doubt. The future of AMC Theaters, however, is very much in doubt, with its current stock price dramatically overvalued. There is a “substantial disconnect” between the future of movie theater attendance and in AMC's earnings power in relation to its current enterprise value and “over-levered” capital structure,” Greenfield wrote.

Wall Street's three main indexes remain under pressure this Tuesday as rising treasury yields continue to spook investors. The risk aversion will likely prevail in the next trading days, and April may bring more pain for stock market investors. Learn more about the chart of AMC shares or go trading AMC at Capital (review). You can go either long or short with the click of a button for the stock-CFD called AMC at Capital!

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Technical analysis of AMC shares
AMC shares have already lost more than 20% in less than two weeks, and the risk of further declines is not over yet. With the trend still clearly pointing to the downside, we can expect that the price could soon test a strong support level at $8. One of the easiest ways to buy or short AMC shares is through a margin trading platform. Many brokers allow this type of trading, with margin trades allowing investors to “borrow” money from a broker to make a trade. It's important to remember that there may be a leverage factor, which could either increase your profits or your losses. It's not a good idea to hold a short position for long periods or to leave an open position with no stop-loss order.

AMC chart

On this chart (the period from April 2020), I marked current support and resistance levels to help traders understand where the price could move. The more often price tests a level of resistance or support without breaking it, the stronger the resistance or support area is. When the price passes through the resistance, that resistance could potentially become support. AMC has been a great performer in January 2021 when it came to price gains, and if the price advances again above $12, the next resistance could be located around $13 or even $14. The current support level is $9, and if the price breaks this level, it would be a “SELL” signal, and we have the open way to $8. If the price drops below $8, which represents very strong support, the next target could be located around $6. So please watch out for those levels and consider new technical patterns forming. The best broker for trading AMC if you're American is eToro. Try eToro yourself today!

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Risk warning:

Conclusion
AMC Entertainment Holdings is not a bad company, but shares look way too expensive, and the recent 20% selloff could be the beginning of a much larger downturn. AMC shares have advanced from $2 above $20 in January 2021, even though the underlying business didn't perform nearly as well. Many analysts agree that there are plenty of reasons to be bearish on AMC at the current stock price, especially if sentiment around the U.S. stock gets worse. If the price drops below $8, which represents very strong support, the next target could be located around $6.