The world’s largest cinema operator AMC Entertainment (NYSE: AMC)
stock has been on a tear as the resurgence of “meme” stock
squeezes continues, but it’s no GameStop (NYSE: GME)
. It also appears that AMC and GameStop have decoupled in the near term as Reddit traders are favoring AMC. While GameStop continues to bleed and attempts to find a bottom after it’s less than impressive Q1 2021 earnings results, AMC continues to maintain elevated levels of volume despite the monstrous dilution
taking place. While GameStop’s recent rebound
has created a new template for meme stocks being more than a one-shot wonder, the notion that AMC will short-squeeze
as GameStop did in January 2021 is very likely not mechanically feasible. Here’s why AMC can’t squeeze like GME and potential opportunistic pullback levels for nimble traders and high-risk tolerant speculators can monitor for.
AMC Versus GameStop
AMC is the world’s largest cinema operator but has been completely decoupled with peer stocks like Cinemark (NYSE: CNK) and IMAX (NYSE: IMAX). Instead, it has taken a life of its own after having raised its average trading volumes in excess of 100 million shares a day with some days hitting over half a billion shares. Additionally, the Company has finally utilized the heavy liquidity to raise cash in at-the-market offerings to the tune of $1.2 billion in May and June 2021, alone. The float has arisen nearly 500% year-over-year (YoY) to nearly 500 million shares with a possible 20% short interest. Average volume has risen to nearly 150 million shares a day. The CEO of AMC, Adam Aron, has paid attention to the retail investor/traders and has made himself available almost to a ridiculous pandering level where he had a webcam one-on-one zoom call with a YouTuber trying to convince him that the “tool” for AMC was… well, more dilution with at-the-market offerings. He “accidentally” knocked over his webcam, only to reveal he wasn’t wearing pants (while wearing a dress shift and tie) for the interview. Many reddit-ers were convinced this was a message against the “shorts” but in reality, it shows just how shallow his respect for the little guy truly is, despite offering free popcorn for shareholders. He is a bit too transparent and the pandering to the retail investors/traders is a dangerous path. The biggest problems is the dilution factor, the hype ready CEO and pandering too much to be transparent. GameStop, on the other hand, has a mere 58.5 million share float with 69.4 million shares outstanding as a 17% short interest (as of May 28, 2021) and a cryptic management that doesn’t cater to the retail investors (not as much as AMC CEO Aron). In fact, GameStop has a new CEO coming from Amazon (NASDAQ: AMZN). The lack of transparency is what feeds the speculation of potential squeezes and outcomes. By taking away this “hope-ium”, AMC does not do any favors for itself and shareholders. Here’s the opportunistic pullback levels for seasoned traders only.
AMC and GME Price Action Analysis
Using the rifle charts on the weekly and daily time frames provides a broader view of the playing field for AMC and GME shares. The weekly rifle charts are surprisingly correlated despite the big divergence in the daily charts for AMC and GME. This time around, it appears that AMC is finally rising to the occasion as GME is the laggard. Both AMC and GME have weekly pup breakouts with rising stochastic that are forming mini pups. GME needs work as the 5-period moving average (MA) sits near the $218.86 fib. If shares can rise above $218.86, then the weekly stochastic can form a mini pup towards the weekly upper Bollinger Bands (BBs) at $321.36 Fibonacci (fib) level. It is worth noting that the weekly BBs are in a compression mode on GME, which indicates a price range compression that precedes the range expansion. AMC, on the other hand, is in a weekly BB expansion as shares exceed the weekly upper BBs at $57.53. If shares fall back under the weekly upper BBs, then a channel tightening to the weekly 5-period MA sits at $38.95. GME has a weekly market structure low (MSL) buy triggered above $175.20, which the bulls will step up to the plate to support. The weekly rifle chart on AMC has form a channel tightening if the weekly stochastic crosses back down, which sets up a channel tightening towards the weekly 15-period MA. Only seasoned nimble traders should even consider trading AMC or GME. Here are opportunistic pullbacks to consider for GME at the $193 fib, $175.29 weekly MSL, 150.50 fib and $122 fib double bottom level give or take 2-3 points on each level. Opportunistic pullbacks for AMC sit at the $41.25 fib, $37.50 stinky 2.50s range, $25.50 fib, and the $20.01 super fib level. Keep track of your allocations and stick to short-term swings with stops in place and most importantly, be aware of maintenance margin requirements and stay well above them. Selling puts at the levels is another strategy to collect income as long as you are willing to be assigned.
Before you consider AMC Entertainment, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and AMC Entertainment wasn't on the list.
While AMC Entertainment currently has a "Reduce" rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Just getting into the stock market? These 10 simple stocks can help beginning investors build long-term wealth without knowing options, technicals, or other advanced strategies.Get This Free Report