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Meme Stocks Like AMC and GameStop Have A Lot to Prove

AMC Entertainment and GameStop are getting crushed as meme stocks are under pressure. Can these two reverse the technical damage on the charts?

Meme stocks have been under assault, which is not too surprising given the climate.

The Nasdaq suffered a peak-to-trough decline of 7.9% amid the latest correction, but growth stocks have been hit even harder.

Despite many of these names being high-quality holdings — like Twilio  (TWLO) - Get Twilio, Inc. Class A Report and PayPal  (PYPL) - Get PayPal Holdings, Inc. Report — they have been decimated from the highs.

Now growth stocks are trying to prove that a bottom is in.

In that sense, it’s no surprise to see stocks like GameStop  (GME) - Get GameStop Corp. Class A Report and AMC Entertainment  (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report under pressure.

Here’s how r/WallStreetBets is reacting to the decline and here’s how the charts look.

Trading GameStop Stock

Daily chart of GameStop stock.

Daily chart of GameStop stock.

GameStop reported earnings last week, but it was not enough to spur much interest from the buyers.

The stock fell about 10% after earnings, sending GameStop below the prior week’s low near $159. This level then turned to resistance as shares have continued to move lower.

Now the stock is struggling to hold the prior quarter’s low near $145.70.

While GameStop stock did give investors a nice bounce and bullish reversal on Tuesday, it’s still struggling with the third-quarter low.

Even if it wasn't struggling with this level, GameStop would need to do a lot more than that to prove that bulls are back in control.

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For starters, it also needs to recover the $159 level, as well as the 10-day and 10-month moving averages. If it can do that, we could see a quick move and a big rally.

Specifically, that could put the 50-day and 200-day moving averages in play. 

Of course, it will also need to contend with the 21-day moving average, which is currently near these other measures now but unless the rally happens quickly, the declining 21-day will likely be much lower.

A move below this week’s low could put the 21-month moving average in play, followed by the $100 level.

Trading AMC Stock

Daily chart of AMC stock.

Daily chart of AMC stock.

AMC stock is struggling with some box-office duds plaguing its momentum. But the stock has been struggling for several weeks now.

Once support gave way in late November near $35, it was all but over for the stock.

Rather than bouncing at key measures — like the 200-day — AMC stock sliced right through it. Then instead of reclaiming these areas, they were resistance.

Like GameStop, AMC had a nice bullish reversal on Tuesday. However, we’re not seeing much upside follow-through on Wednesday.

If AMC continues lower, the $20.36 level should be on watch, which was the high in January on the initial meme-stock thrust. Below that level puts the 21-month moving average in play, then the $14.50 breakout level.

To undo some of the damage, AMC needs to reclaim $28.90 and its 10-day and 10-month moving averages. If it can do that, the 200-day moving average and December high is in play.

Bulls will have a hard time seizing control if the stock is below these levels.