AMC Entertainment Stock Pops Slightly Higher But Fails To Negate This Pattern: A Technical Analysis

AMC Entertainment Holdings, Inc AMC was popping slightly higher on Tuesday, consolidating after plunging over 20% between June 14 and June 23 ahead of a proposed settlement with shareholders, involving the conversion of AMC Preferred Equity Units (APE) into common shares.

The plunge combined with the consolidation has settled AMC into a possible bear flag pattern on the daily chart. The bear flag pattern is created with a steep drop lower forming the pole, which is then followed by a consolidation pattern that brings the stock higher between a channel with parallel lines or into a tightening triangle pattern.

For bullish traders, the "trend is your friend" (until it's not) and the stock may continue to rise upwards within the following channel for a short period of time. Aggressive traders may decide to purchase the stock at the lower trendline and exit the trade at the higher trendline.

Bearish traders will want to watch for a break below the lower descending trendline of the flag formation, on high volume, for an entry. When a stock breaks down from a bear flag pattern, the measured move lower is equal to the length of the pole and should be added to the highest price within the flag.

A bear flag is negated when a stock closes a trading day above the upper trendline of the flag pattern or if the flag rises more than 50% up the length of the pole.

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The AMC Chart: AMC’s bear flag pattern was formed between June 14 and Tuesday, with the pole formed over the first seven trading days of that timeframe and the flag forming since then. The measured move on a break below the pattern is about 20%, which suggests AMC could fall toward the $3.26 mark.

• Bearish traders want to see AMC break down from the flag formation on higher-than-average volume, which will also confirm the stock’s downtrend is intact. Bullish traders want to see AMC break up above the eight-day exponential moving average, which will negate the bear flag.
• AMC is also trading in an inside bar pattern, which leans bearish. However, the stock’s relative strength index is measuring in at about 27%, which suggests AMC is oversold, and the stock is likely to bounce at least moderately over the next few trading days.
• AMC has resistance above at $4.31 and $5.23 and support below at $3.56 and $3.

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