Why AMC Entertainment Stock Could Go Bananas

 Why AMC Entertainment Stock Could Go Bananas

AMC Entertainment Holdings, Inc (NYSE: AMC) was trading slightly lower when the markets opened Friday morning, but at 10:15 a.m. bullish volume came into the stock and propped it up.

The short interest on the stock has been increasing and as of Aug. 31 the number of shares held short came in at 95.94 million, meaning 18.76%. The figure is up from 85.85 million in July.

The amount of naked shorting on AMC Entertainment is not included in the number of registered shares held short and could be significant. Naked shorting is an illegal market manipulation tactic where synthetic shares are lent between brokers and large hedge funds.

AMC also has a massive amount of trading activity occurring over the dark pool. The dark pool allows financial institutions and hedge funds to trade anonymously and can be used as a predatory practice. As of Friday at 10 a.m. ET, over 60% of AMC’s trading volume was completed over dark pools.

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The AMC Chart: After hitting a high of $52.79 on Sept. 13, AMC entered into a downtrend and declined about 28% to a low of $37.74. The stock then created a double bottom pattern and the level and bounced up about 10% higher.

The decline set AMC’s stock into a falling channel pattern where it made a series of lower highs and lower lows between two parallel lines. On Thursday, the stock broke up bullishly from the falling channel, tested the upper descending trendline of the channel as support and closed the trading day above it. On Friday, AMC was holding above a support level at $39.07, possibly consolidating the break of the pattern.

  • If AMC is working on a bullish trend change, Friday’s action may serve as the higher low. Bulls can watch for future trading action to create a higher high above $42 level. Sideways price movement on low volume indicates consolidation as opposed to downward pressure.

  • Bears will need to see a break of the $39 level and for big bearish volume to push the stock down to a lower low below $37.74. Below the level, AMC has support at $31.81.

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