- AMC shares continue to defy gravity as the meme space suffers.
- Fed passes on Wednesday without doing too much damage to equities.
- AMC options for Friday expiry look interesting again.
AMC shares continue to defy the odds, gravity and any other form of rational stock analysis as they continue to remain in orbit around the moon. AMC did drop over 6% on Wednesday, but given where the stock has come from, that is merely an intraday move for this type of volatility. Speaking of volatility, it remains hugely elevated. The chart below shows the implied volatility for AMC calls since the start of the GameStop (GME) rally in January. Currently, volatility sits at about 250%. By contrast, volatility for Apple is about 20%. The interesting point to note is despite the huge spike in the AMC stock price in this second wave, volatility has not been as high as back in the original move in January.
Source: Alphaquery.com
AMC stock forecast
Fridays have been a recent battleground for options expiries in AMC, and this Friday coming proves no different. The surge in the AMC share price has seen a corresponding surge in open interest in call options expiring this Friday. Data from Reuters/Refinitiv below shows the strikes around the money and associated open interest.
Each option contract is for 100 AMC shares, so approximately 420,000 option contracts between $35 and $84 strikes on this page alone mean 42 million shares will expire if AMC closes above $84 on Friday. It is unlikely that it will close that high, but this is AMC we are talking about! The flip side is the more options that expire worthless or unexercised the more market makers' gamma unwind will see selling pressure on AMC shares.
The AMC share price itself has been holding nicely above $50 for most of June so far. The 30-minute chart shows the uptrend in place, and the lower trend line has been acting as support on a short-term, intraday basis. This support is set today at $53.50 but obviously moves as time passes.
Using the daily chart for a wider viewpoint, but just taking the most recent parabolic move, shows the volume profile drop off alarmingly below $44, meaning a break should accelerate to $32 where volume picks up again. Wednesday's point of control intraday volume was toward the lower end of the daily candle, another bearish factor. The 9-day moving average at $50.94 will give further clues. For now, AMC shares are holding above, so short-term bulls are in charge. A break on the other hand will likely see a test of $44. Tuesday's low of $56.73 is a short-term bullish pivot.
The author is long AMC puts
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