How to Trade AMC Entertainment After It Reports Earnings

AMC Entertainment  (AMC) - Get Report continues to ride the Reddit hype, particularly with stocks like GameStop  (GME) - Get Report still riding high.

However, earnings could throw a curveball in the mix when AMC reports after the close of trading Wednesday.

On Monday, Wedbush analysts doubled their price target on the stock to $5. However, that would imply more than 50% downside from current levels.

Even though shares are well off the session highs, AMC stock was still up about 11% on the day as of this writing. Shares have been all over the map lately, but are currently up about 45% in the last three trading sessions.

Of course, the action comes after a 75% decline from the January high, as shares look to recoup some of those losses.

It’s a very mixed bag with AMC as the company continues to struggle but as the country continues to reopen. The reopening trade paired with the WallStreetBets hype has made for a volatile ride.

Let’s look at some key levels on the chart. 

Trading AMC

On the chart above, notice that this pre-earnings four-day ramp came off a retest of the $7.50 area.

This zone has been significant over the past year, most serving as resistance until January 2021. That’s when AMC rocketed through this level on its way to $20.

After a few days of extreme volatility — where shares went from ~$20 to $7 and back to $17 — AMC ultimately settled down in the $5.50 to $6 range before pushing back through $7.50 and enjoying the rally we’re seeing today.

Stalling at the 200-week moving average as we speak, earnings will likely be a deciding factor in how the stock trades over the short term.

On the upside, I want to see if the stock can take out Wednesday’s high and fill the gap up near $13. If it can do that, there’s nothing that technically keeps the stock from retesting the 61.8% retracement at $14.59.

Above that puts $16 in play. On an extreme push, $20 could eventually be on the table, but with AMC wisely raising capital on its prior price spike, the additional supply of stock makes a robust rally hard to bet on.

On the downside, it’s pretty simple. Bulls want to see the 10-day moving average hold, but need to see $7.50 hold as support. Below puts the February low in play at $5.26, followed by the 200-day moving average just below $5.