AMC Entertainment Holdings Forecast: AMC struggles to break $14.54 resistance as RSI shows oversold

AMC shares staged their eighth day of consecutive gains on Tuesday and in the process broke key resistance at $14.54. The shares rallied strongly in the premarket on Tuesday but found the regular session tougher. AMC eventually retreated back below the $14.54 resistance level and closed out the day at $14.03.

Just in case you are not too familiar with the whole GameStop and related meme stock saga, here is a little recap of the story so far from AMC's point of view. AMC is a global cinema chain and, as a result, has struggled during the global pandemic as most of these cinemas have been closed for the better part of a year. The company narrowly avoided bankruptcy through the interest of retail traders. By strongly backing it, these retail traders allowed AMC to raise capital and debt, meaning it could survive the pandemic. 

AMC stock forecast

AMC announced on Thursday of last week that it had completed the offering of 43 million shares it launched on April 29. AMC CEO and President Adam Aron said, "the additional cash raised puts AMC in a stronger position to tackle the challenges and capitalize on the opportunities that lie ahead." During the Q1 results presentation on May 6, the CEO also referred to the new wave of retail investors who had helped save the company. Adam Aron also donated money to a favoured r/WallStreetBets charity, the Dianne Fossey Gorilla Fund. This obviously endeared him further to retail investors who rewarded AMC by pushing the shares through several key resistance levels. The results themselves had not been great with the Earnings Per Share (EPS) loss actually coming in worse than feared but the CEO was positive on the conference call. This started the rally, which was then added to by the fundraising.

AMC share price exploded out of the triangle formation FXStreet had identified. The first breakout target of $12.22 was duly captured and is now the key level to hold for bulls – or should we call them "apes" as they prefer? – consolidation for a time is fine for bulls, so long as this $12.22 level is not breached. A break of this mark would end the bullish move and sentiment.

Tuesday saw gains early on for AMC and it duly pushed through the $14.54 resistance but these gains were not held. Still, not a problem so long as $12.22 is not broken. As mentioned on Tuesday, many traders would have preferred a period of consolidation and price discovery above the $12.22 level before pushing higher. On Monday, we signalled the speed of the move was a concern, and this has been duly noted by both the Relative Strength Index (RSI) and the Commodity Channel Index (CCI). Both are now in overbought territory. A consolidation phase above $12.22 would allow the lagging RSI and CCI to essentially catch up and stabilize and retreat to more neutral levels. 

The target of a triangle breakout is the size of the entry, in this case, a $7.88 range entry. The breakout target is set, therefore, at $19.08. This is also close to the highs seen back in January during the peak GameStop (GME) saga when AMC shares topped out at $20.36.