After bouncing from $40.00, the AMC stock price is rolling over, and the next visit to $40.00 may be a brief stop-off on the journey much lower.
AMC Entertainment Holdings (NYSE: AMC), finished Monday at $42.46, down $0.49 (-1.14%).
On July 5th, with the stock trading at $51.96 I asked, “what comes first $40.00 or $60.00?”. Six days later, we had our answer.
AMC broke down to a low of $38.79, before bouncing from close to my predicted support level.
A logical downside target for shorts is the $37.50 -38.50 range.
Following this dip, the stock bounced 28% to $49.79. Notably, this was an almost perfect 50% retracement from the point the AMC stock price broke down on the 1st of the month.
Since almost tagging the psychological $50.00 level, AMC has been steadily declining. The price action suggests that the reactive bounce was exactly that, a knee-jerk reaction from an important support level.
Now heading back to $40.00 (premarket data shows AMC will open lower, around $42.00), the stock may exceed the previous target, and I believe $25.00 could now be on the cards.
AMC technical outlook
The daily chart shows the AMC stock price has been in a downtrend since the Jun $72.62 high. Previously a strong uptrend had countered the descending line, and formed the basis of a narrowing triangle formation.
It was the break below this trend line that reinforced the dominance of the dopntrend, leading to the 30% decline in the first week of July.
Furthermore, the recent weakness is signified by the 50-day moving average st $51.95, completing a bearish crossover of the 100-day at $53.37.
Additionaly, the MACD (Moving Average Convergence Divergence) Indicator has turned negative, which lends weight to the shift in momentum.
Volume has also dried up, and noticeably lighter than during June’s rally. Which further indicates, a lack of buying interest.
Of course, support is still seen below the market in the $37.50-$38.50 range, and below that, the 200-DMA at $36.14 is likely the only thing stopping my $25.00 price target becoming reality.
I would consider the descending trendline, above the market, at $55.28 , as the most significant resistance level. And as long as the AMC stock price stays below this barrier, I consider it vulnerable.
Therefore, only a close above $55.28, invalidates my bearish $25.00 per share prediction.