AMC stock explodes 45% on hopes for more 'transformational' deals

Update: AMC Entertainment emerged as the mother of all short squeezes Monday after it soared roughly 45%. In doing so, AMC stock price extended its winning streak into the tenth straight trading day.  The stock price has almost doubled in just two weeks. Monday’s massive gains come on the heels of the comments from the cinema chain's CEO Adam Aron, who told Reuters that he expects to see more "transformational" deals in the future.  Aron said: "I'd like to think there will be more third-party external M&A announcements going forward where AMC can reach for the stars and intriguing investments that have potentially attractive returns.”

Adding to the uptrend in AMC stock price, Hycroft Mining Holding Corp (HYMC) announced that it has completed a $138.5 million stock offering program. Earlier this month, AMC announced that it bought a stake in the gold and silver miner, Hycroft.

AMC stock continues to see more interest on social media on Monday as the stock seeks to build on the strong performance of last week. Not only AMC, but also GameStop (GME) as the meme stock space exhibited strong gains for the last week. While AMC's gain of 28% last week certainly looks impressive, GME stock more than doubled that at 67% up on the week to maintain its meme king status. This week looks set to continue the theme of risk returning, especially in the high-risk meme stock space. 

Read more about GameStop here

AMC Stock News

CEO Adam Aron tweeted over the weekend that more deals are on the way in the meme stock space after the success of the Hycroft Mining (HYMC) deal. AMC entered the world of gold mining with a small investment in Nevada miner Hycroft Mining just two weeks ago. This once small-time gold miner with financial difficulties hit paydirt last week as it managed to raise $139 million via share placing. 

In response, HYMC shares rallied over 20% in after-hours trading. Now, Reuters reported that in a phone interview from his limo on the way to the Oscars, Adam Aron said more meme stock deals are possible as the movie chain looks to become an investment vehicle of sorts.

"I'd like to think there will be more third-party external M&A announcements going forward where AMC can reach for the stars and intriguing investments that have potentially attractive returns," Aron told Reuters. "While the Hycroft investment is pretty far from home, it does rely on a core competency of our company to understand balance sheets, raising cash and solving liquidity problems."

The last statement probably hits the nail on the head. Aron has become expertly skilled at tapping into the trend of the moment and endearing himself to retail traders. This has earned him a large following and allowed AMC Entertainment to raise cash from retail investors, which certainly helped AMC to avoid bankruptcy during the pandemic. 

AMC Stock Forecast

Starting with the 15-minute chart this time to give us a bit of short-term focus, the $18 level and above is key to hold due to the volume gap underneath. Breaking lower will see a quick move to $16 and below. 

AMC stock chart, 15-minute

On the daily chart, we still need to cleanly break above the $21.04 resistance and close above it. Doing that will then open up a move to $26.92. More importantly, it ends the longer-term bearish trend. This may then attract CTA and trend-following funds into the trend's formation or at least stop trend-following sell programs. Now I am bearish on AMC stock from here and am long some puts. I know some of you will not like to read that, but it is a longer-term view. I tend to trade from a fundamental macro backdrop, and I see trouble ahead for the stock market. AMC should hold up in the short term, but longer term I am not as confident. If AMC apes manage to close above the resistance level at $21.04 that I mentioned, then I might close the position.

AMC stock, daily

The author is long puts in AMC and long puts in HYMC.

Previous updates

Update: AMC Entertainment soared on Monday, ending the day up a whopping 44.95% to change hands at $29.33 per share. It hit an intraday high of $29.73, a level that was last seen in December 2021. The catalyst seems to have been the announcement that AMC, in an attempt to diversify, will buy a 22% stake in a gold and silver miner, Hycroft, which shut down in November last year. HYMC was the most benefited out of the headline, ending the day up 78.1%.

Meme stocks ignored the poor performance of Wall Street, which spent most of the day in the red. US indexes managed to recover in the final hour of trading, with the Nasdaq Composite up 1.31% but the NYSE Composite down 0.16%. The DJIA and the S&P 500 managed to post modest gains, holding within familiar levels. Soaring government bond yields and the Russia-Ukraine conflict undermined demand for high-yielding stocks. 

Update: AMC stock has advanced as much as 16.6% on Monday to $23.60. It seems meme stocks are very much back in popularity. GameStop (GME) for its part as the original leader of the movement is up more than 8% at the same time. For all the fanfare, the broad markets are fairly inactive. The Dow has lost 0.3%, the S&P 500 is flat, and the Nasdaq is up a meagre 0.2%. CEO Adam Aron seems to have fanned the hunger for his company among retail traders after telling Reuters that AMC may become a sort of holding company for meme stock investments. Investors are also impressed that Hycroft Mining was able to raise more than $190 million in a share offering, instantly making AMC's investment look more attractive. $23 calls expiring this Friday are on fire this morning, with 12,900 in volume already hitting the tape. The last contract sold for $2.05.

Update: AMC stock has opened higher on Monday with the stock surging over 5% higher in the first few minutes before tacking on another 3% as CEO Adam Aron appears on CNBC. The CEO recently commented about continuing the theme of deals that saw AMC take a stake in HYMC and send retail traders into a delighted frenzy over both stocks. While AMC is 8% higher on Monday, HYMC stock is 36% higher as the company raised cash from shareholders to fund future operations. both stocks are benefitting from a resurgence of retail interest as equity markets shrug off worries over rising commodity prices and the Ukraine situation. AMC has broken the key $21.04 level already on Monday so now a strong close will end the bearish trend.