Why did the AMC stock price turn a 10% rally into a 6% drop yesterday?

The AMC stock price started the day firmly in the green following the cinema chains’ Q2 earnings. But how come the stock ended the day deep in the red?

AMC Entertainment Holdings Inc (NYSE: AMC) finished Tuesday at $31.75, down $2.05 (-6.05%).

The early signs were positive for AMC yesterday. The stock was higher by 10% in premarket trading and looked to improve further when the bell rang for the official session.

However, the AMC stock price reversed the early rally, clutching defeat from the jaws of victory and ending sharply lower.

The volatile trading in the Reddit favourite followed the release of the cinema chain’s second-quarter data on Tuesday evening. And whilst the company reported a 2,253% year-on-year jump in revenues, there was clearly something the market was not happy about.

Second-Quarter earnings review

Earnings per share (EPS) for the period showed a loss of $0.71c, narrower than analysts expectation of -$0.94c.

Furthermore, the $445 million three month revenue is heading in the right direction. However, considering the same period of 2020 delivered close to zero revenue, it’s hard to see how it could have been worse.

Additionally, AMC revealed it had sold more than 22 million theatre tickets in the period.

Although, as wolf street reported, the company also sold 63 million shares at the same time.

AMC Entertainment price forecast

On Monday, AMC closed above descending trend resistance at $32.80. Furthermore, yesterdays open appeared to confirm the breakout and should have put the stock on a path to the major downtrend resistance at $44.00.

However, by the close, the AMC stock price had reversed back below the resistance and is now targeting trend line support at $28.70.

The 100-day moving average at $28.65 provides additional support to the trend, making $28.65 a significant level to watch.

Previous attempts to push AMC below the trend have fallen flat, resulting in material rallies. And therefore, it is of particular interest how the price reacts in the next day or so.

If $28.65 fails, the bears will push for an extension to the 200 DMA at $16.92, around 40% below the last traded price.

Although, as I have previously stated, betting against the wallstreetbets crowd should come with a government health warning. And on that basis, I would not be surprised if AMC holds the support level and reverses higher.

Ultimately, the positioning will lead to extreme volatility in either direction. The Hedge funds are heavily short, and retail is heavily invested. And at this stage, it’s still unclear which side has the upper hand.

AMC stock price chart (Daily)

AMC stock price prediction

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