AMC Entertainment (AMC) - Get AMC Entertainment Holdings Inc. Class A Report, GameStop (GME) - Get GameStop Corporation Report and others are back at it. These Reddit stocks have been red hot and are starting to squeeze higher with strong upside rallies.
As these so-called meme stock leaders fetch a bid, they’re dragging others higher too.
Virgin Galactic (SPCE) - Get Virgin Galactic Holdings, Inc. Report - which had its own flight-related catalyst - Rocket Cos. (RKT) - Get Rocket Companies Inc. Class A Report, BlackBerry (BB) - Get BlackBerry Limited Report and others have been enjoying some strong rallies.
However, AMC has been the undisputed leader in the recent move.
While GameStop sparked the first major short-squeeze trade earlier this year, it’s up “just” 45% over the past five days. While impressive, that pales in comparison to AMC, which is up 175%.
Let’s look at the charts to see what’s going on with this one.
A few weeks ago, I pointed out that AMC stock was struggling with the 61.8% retracement near $14.60. In multiple trading sessions, it simply couldn’t push through.
However, there were positives. For instance, AMC broke out over the 50-day moving average, as well as the April high at $12.22.
Even better though, the stock held these measures as support when it faded from the 61.8% retracement. That set up a beautiful buy-the-dip pullback, as shares soon rotated back to the highs and then took out the 61.8% retracement with force.
That sparked a series of upside gaps. Shares paused briefly near the prior highs from January, as you can see on the four-hour chart above.
But on Thursday, the stock again erupted higher, climbing more than 50% at one point in the day to hit the 161.8% extension near $30.
So now what?
Shares again burst higher to another key extension on Friday, that being the two-times range extension. However, AMC stock is also fading hard from that mark. If AMC can take out Friday’s high, then the 261.8% extension is certainly possible, up near $45.
How can we say it’s not possible after the last few days of price action?
The divergence on the Williams %R reading is a bit concerning, but I’m not going to step in front of a short-squeeze freight train. Profit-taking is one thing, selling short is another.
On a dip, let’s see what level comes in as support. I would really like to see $30 or $25 hold. But even more, I want the 10-day moving averages on the daily and four-hour charts to be support, along with $20.