AMC stock price faces a tough test at major support: What happens next?

The AMC stock price has certainly been entertaining this year. Yesterday’s 11% drop has pulled back to key support, which may make for interesting viewing.

AMC Entertainment Holdings Inc (NYSE: AMC) suffered steep losses Wednesday, falling more than 11% to a two month low of $29.84. But as has been the case with the meme-stock collective, it’s hard to know if the curtains are closing or an encore performance is just about to start.

The last time the AMC stock price fell to a significant support level, it jumped 50% in the following two days.

Of course, there is an ongoing debate about how short some of the Reddit Wallstreetbets favourites, such as AMC and Gamestop, actually are. If you believe the mainstream outlets, the shorts have considerably decreased. If you jump on to Reddit, you will discover an opposing theory.

So in this instance, I will instead focus on the technical backdrop.

What comes next?

The daily chart shows the AMC stock price has pulled back around 60% from June’s $72.62 high.

Additionally, the price action has formed a bear flag pattern. The lower end is visible at $29.20, just below yesterday’s close.

The 100-day moving at $27.87 average adds to the price support below the market. However, robust support turns into significant resistance when it is breached. On that basis, a close below $27.87 will likely lead to further losses for AMC.

However, shorting this stock has not been a winner this year. And if the price holds above $27.87, it may reverse higher. In this instance, the top end of the channel at $46.60 becomes the target.

And if that is penetrated, the shorts will be running for cover.

AMC stock price chart (Daily)

AMC share price