- AMC fails to hold above short term resistance.
- AMC shares down nearly 2% in early Wednesday trading.
- AMC shares were boosted on Monday on strong Easter attendance.
Update April 7: AMC shares are failing to hold onto the gains seen after Easter. The long Easter weekend had seen strong cinema attendance in the US and in particular for the Godzilla Kong movie. This had led AMC to test the waters above 21 and 9 day moving averages but it failed to hold above. AMC shares are down 2% and $9 is the next support level.
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 AMC, these retail traders allowed AMC to raise capital and debt, meaning it could survive the pandemic. AMC and GameStop were two of the meme stock favourites at the height of the retail trading boom. Volumes on retail sites are lessening as the US opens back up, reducing the captive trading audience.
AMC stock price
AMC popped 13% on Monday with a number of catalysts at play. A strong opening weekend for Godzilla v Kong showed just how pent up demand is for movie-going after the long lockdown. IMAX also showed a strong performance from Godzilla v Kong. With AMC operating numerous IMAX screens, this is also a tailwind for the stock.
Separately B. Riley Securities issued a bullish research note on AMC, which further added to the positivity around the stock on Monday. The company said it was impressed with AMC management's ability to strengthen the balance sheet and negotiate deals with landlords. B. Riley gave AMC a $13 price target and upgraded AMC shares from neutral to buy.
AMC rallied sharply on Monday, closing up 13% at $10.61.
AMC still has serious problems, which make a long-term investment in the stock questionable. AMC just has way too much debt and is facing headwinds from streaming players releasing online and in cinemas simultaneously. Disney has recently made such announcements. Yes, there is definitely pent-up demand, which will come out over the summer as economies reopen. But AMC needs to repay this massive debt pile, and it needs more than a short-term kick to do so.
Shorter term is more interesting, as we do not need to worry as much about the underlying problems. On Monday, AMC broke above the 9-day moving average and ran into headwinds on the 21 day. This is the first level AMC needs to break to stay bullish and is currently at $11.13. A break will lead us to resistance at $11.56 (recent high) and $11.77, the low from March 22, and then the recent highs above $14. Support at $10.19 is provided by the 9-day moving average, and key support is the low from late March at $8.88, which also corresponds to the 50-day moving average.
The trend is still bearish, however, unless we can break above the $11.56 to $11.77 resistance region as a series of lower highs is in evidence.
Update: AMC shares are struggling for momentum on Tuesday with early trade seeing AMC lose over 3%. The shares had been boosted by strong Easter cinema attendance across the US but gains have not fed through to Tuesday. AMC has balance sheet problems with a large debt overhang so any gains will need to overlook that important point! Tuesday's losses are however likely the result of Monday's 135 gain and profit-taking was inevitable. Shares currently at $10.28, down 3.1%.
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