AMC Stock Forecast As Prices Look Poised to Trade Below $5

AMC stock price is in a downfall after plunging by more than 40 per cent on Monday and extending the strong and aggressive downward push yesterday with a drop of 8 per cent.  

InvestingCube's S&R Levels

FTSE100

FTSE100 (7031)

In Profit

STOP

SELL

TP1

7146

TP2

7127

The drop was also a pile-up from last week’s drop of 26 per cent, which saw AMC stock price dropping from trading at $24 to closing the week at $18.

Why did AMC stock plunge?

Part of the reason we saw AMC plunging in the markets is due to their new preferred shares, the theatre chain’s  APE units, that they recently launched. According to reports, the APE units started trading on Monday, the same day we saw one of the company’s largest drops in a single trading session in its history. 

In some way, the introduction of the APE units as a share class has all the characteristics of a stock split. Therefore, when the two are combined, that is, one AMC share and one APE unit are put together, then the drop on Monday was only 8 per cent. When the APE price is adjusted to its first trade, then the combined AMC and APE stock prices show the company’s price only dropped by 5.5 per cent on Monday. 

AMC Stock Price Analysis 

As seen above, the introduction of the APE units has been the main reason we saw a 40 per cent drop in stock price on Monday, and continuation yesterday when the prices dropped by 8 per cent. Although the APE units had previously been distributed to investors before the listing on Monday, new traders investing in AMC need to take caution. There is a high likelihood that the AMC stock price will continue dropping for the next few trading sessions. 

My price expectation is for AMC to trade below the $8 price level in the coming sessions. The possibility of hitting $5 and trading below that level is also high based on the recent price action that has been aggressively bullish. Following what looked to be a stock split, the recovery of the stock price will also take time. Therefore, my AMC stock price prediction expects the current bearish trend to be long-term. A trade above the $15 price level will, however, invalidate my bearish analysis.

AMC Daily Chart