AMC Entertainment Holdings, Inc (NYSE: AMC) was spiking over 5% at one point on Wednesday as the stock continued a six-day bullish streak ahead of the release of "Taylor Swift: The Eras Tour."
The concert film brought in over $100 million in worldwide advance ticket sales as of Oct. 4, and AMC CEO Adam Aron expects demand to remain strong, noting that most people buy tickets the day before or on the day they plan to view a movie.
From a technical analysis perspective, AMC is trading in an uptrend and possibly setting up a cup-and-handle pattern, but needs a pullback because the stock hasn't retraced since Oct. 3.
A cup-and-handle pattern can be either a powerful reversal indicator when found at the bottom of a downtrend or a continuation pattern when found in an uptrend.
The pattern is formed when a security forms a rounded trough (cup) and then rises upwards before consolidating downward between two parallel lines (handle). The handle should begin to form before the stock has risen as high as the top of the left side of the cup.
When the security breaks up through the handle on higher-than-average volume, it indicates the pattern was recognized, and a rally may follow.
The AMC Chart: AMC negated its downtrend on Oct. 3, when the stock formed a higher low. AMC confirmed a new uptrend two trading days later, with the formation of a higher high. Since Oct. 5, AMC has continued to trend higher and hasn't retraced to form another higher low.
- On Wednesday, AMC was showing signs the local top may be in, which suggests a pullback is likely on the horizon. The theater chain is trading on declining volume, indicating the bulls are becoming tired. The stock is also working to print a possible shooting star candlestick.
- If AMC starts to retrace over the next few trading days, the stock may form a bullish cup-and-handle pattern, with the cup formed between Sept. 5 and Wednesday. If that happens, the handle will serve as a higher low within the uptrend.
- If AMC continues to trek higher without consolidating, the stock is likely to reach resistance at the top of an upper gap, which exists between $11.70 and $12.64. Bearish traders looking to take a position will want to see a hard rejection near the $13 mark and then for big bearish volume to come in and drop the stock back under the lower range of the gap.
- AMC has resistance above at $12.22 and at $14.68 and support below at $9.90 and at $8.51.