AMC Entertainment Consolidates Under Key Level: The Bull, Bear Case Heading Toward Q1 Earnings

AMC Entertainment Holdings, Inc AMC was trading 1.9% on Wednesday morning after closing down 2.65% to end Tuesday’s session.

The theater chain has been battling a heavy resistance level near the $5.75 mark and, because the stock has been unable to break through the area, has formed a bearish triple-top pattern.

A double, or triple top pattern is a reversal indicator that shows a stock has reached a key resistance level, retraced lower, back-tested the level as resistance, and is likely to retrace again. It is possible the stock may retest the level as resistance again, creating a quadruple top pattern.

The formation is always identified after a stock has reached a price and is at the top of an uptrend, whereas a bullish double-bottom pattern is always found in a downtrend. A spike in volume confirms the triple-top pattern was recognized, and subsequent increasing volume may indicate the stock will retrace into a downtrend.

Looking Ahead At Earnings

The possibility of AMC breaking the triple-top pattern might hinge on the stock's response to its Q1 earnings, scheduled for release on Friday.

For the quarter, analysts expect AMC to report an earnings loss of 16 cents per share on revenues of $941.13 million.

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The AMC Chart: AMC started trading in an uptrend on April 24 and has since made a consistent series of higher highs and higher lows. The stock’s most recent higher low was formed on April 27 at $5.16 and the most recent confirmed higher high was printed at the $5.74 mark on Tuesday.

• Although AMC printed a hanging man candlestick on Tuesday, the lower wicks on Monday and Tuesday’s candlesticks indicate there are buyers below $5.50. If traders continue to support the stock under that area, AMC will be more likely to break up above the triple top.
• If AMC falls lower heading into Friday’s earnings print, the stock may settle into a cup-and-handle pattern on the daily chart, with the rounded cup formed between April 12 and Tuesday and the handle forming afterward. If that happens, the measured move is about 17%, which suggests AMC could trade up toward the $6 mark.
• Bearish traders want to see AMC react to the hanging man candlestick and then for big bearish volume to come in and drop AMC down under the $5 mark, which could add more pressure to the downside and negate the uptrend.
• AMC has resistance above at $6.33 and $7.47 and support below at $5.23 and $4.31.

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