AMC Entertainment Holdings Stock Price and Forecast: Why is AMC stock falling?

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 $40s. Macquarie then is unlikely to have caused the sell-off.  There have been a lot of retail options interest in meme stocks 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

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 traders can buy the dip at $40 with a stop at $37 as there is a large amount of volume here. Traders would hope the price will not gap lower too quickly. Alternatively, 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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