Going to the movies is fun and exciting again. But can it match the almost mind-bending action in recent years by AMC Entertainment (AMC)? Starting the year of 2021 at 2 a share, AMC stock skyrocketed more than 36-fold to an all-time high of 72.62 on June 2 that same year.

The drama in the stock market today has continued in 2022.

On Monday, AMC shares are adding to last week’s impressive rebound with a rally of as much as 16% rally to 8.35, its highest price since Sept. 22. That catapulted shares above the 50-day moving average, a welcome change.

The company announced its biggest opening weekend in box office sales for November in its history, powered by the highly anticipated launch of the sequel to “Black Panther.” “Black Panther: Wakanda Forever” welcomed 4.9 million guests at its AMC and Odeon cinemas during the Thursday-Sunday four-day period.

Last week, it gained 27% in the wake of Q3 results.

The company posted a net loss of $226.9 million or 22 cents a share, up a touch from $224.2 million a year earlier. It held 1.03 billion common shares outstanding at the end of the quarter. Revenue jumped 27% to $968.4 million. AMC also reported $224 million in negative operating cash flow. Analysts polled by FactSet saw a net loss of 25 cents a share, smaller than a net loss of 44 cents in the third quarter last year, and a 26% increase in sales to $961.1 million. According to Yahoo Finance, the top-line revenue estimates ranged from $856 million to $1.01 billion.

Shares initially sold off on Aug. 22, spurring a temporary halt of trading due to market circuit-breaker news. AMC sank as much as 42% to a session low of 10.46 and fell below the 50-day moving average, a sign of stock weakness. Why? The company’s preferred equity units debuted on the NYSE under the ticker symbol APE.

Holders of AMC’s class A common shares received one APE for every share of AMC owned on Aug. 15. AMC’s management made it clear to investors that AMC stock would feel the impact of what has been dubbed the “APE-split.”

Since then, AMC stock has continued to struggle.

AMC has now fallen as much as 51% since that Aug. 22 sell-off. Last week, it fell 13% for the week to mark the lowest weekly close since mid-February 2021 — right around the time when the meme stock frenzy kicked into high gear.

BMO Capital recently started coverage of AMC Entertainment at outperform and set a price target of 6.50, Benzinga reported. But like many other highly speculative stocks, AMC shares struggled after the Federal Reserve on Wednesday raised interest rates by another three quarters of 1 point to a target range of 3.75%-4% and Fed chief Jerome Powell signaled that the top rate may go higher than expected.

As seen on a daily chart, the stock has been stuck beneath its sharply descending 50-day moving average — a no no for leading growth stocks.

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The stock’s prospects looked rosier in the spring and summer of this year. AMC went on a tear in May after bottoming out near 10, a key psychological price level. And for nearly two weeks in August, shares bullishly traversed across the long-term 200-day moving average.

Put simply, AMC’s short-term action had been the most bullish since late August to early September of 2021.

Yet at this point, is it time to take any remaininghttps://chetakresult.net/ profits off the table? After all, the May 2021 rally displayed elements of a climax run.

Or is it a buy now?

This story examines fundamental, technical and fund ownership factors to determine if the Leawood, Kan., company with 950 theaters and more than 10,000 screens scores a good probability of making more money for stock traders.

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In early February, AMC posted revenue in the fourth quarter last year of $1.17 billion, soaring 620% vs. a year earlier, and an adjusted net loss of 11 cents a share. The top line beat a Yahoo Finance consensus estimate of $1.09 billion and a net loss of 26 cents. The blockbuster “Spider-Man: No Way Home” boosted ticket revenues big time. AMC management noted bookings for the upcoming flick “The Batman” in its initial weekend as “very strong.”

For several weeks in March, buyers dominated the stock again. AMC reached a four-month high of 34.33. But as a MarketSmith chart shows, AMC stock bumped its head against the 200-day moving average on a daily chart.

AMC made a better recovery in August. It closed several days above the 200-day line. That had not happened since November 2021.

On Aug. 5, AMC reported another round of stronger quarterly results. The company posted a net loss of 20 cents a share, down from a loss of 71 cents in the year-ago period. AMC’s net loss shrank to $121.6 million vs. $344 million in the year-ago quarter. Sales soared 162% to $1.17 billion. That marked the fifth quarter in a row of triple-digit top-line gains.

Plus, on a non-GAAP basis, the company generated positive operating cash flow of $52 million. A year earlier, it burned through $127 million in cash at an operating level. The firm also reported $1.18 billion in available liquidity.

“Our Q2 2022 results… prove once again what we have long said, that as Hollywood releases movies with broad consumer appeal, people will flock to see them at movie theatres in huge and eye-popping numbers,” CEO Adam Aron said in a news release. A total 59 million people saw films at AMC theaters globally, up 168% year over year.

Earlier this month, AMC announced members of its “AMC Stubs” program can watch movies for just $5 per ticket plus tax on every Tuesday through the end of January. Special events are not included in this discount pricing.

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Going Beyond The Box Office?

AMC is pulling all the stops to get movie and TV lovers back into theater seats. During Halloween weekend, AMC announced that the MTV Entertainment Studies and 101 Studios-produced TV hit show Yellowstone held a sneak peek on its screens on Saturday, Oct. 29. To accommodate fan demand, the company added encore showtimes throughout the weekend ahead of Halloween.

Keep in mind that blockbuster movies or TV shows don’t necessarily lead to an equally sizable windfall for the theater operators.

Robert Marich, author of “Marketing to Moviegoers,” told IBD that “profit excess from ticket sales of blockbuster movies goes disproportionately to Hollywood distributors, because theater percentage of ticket revenue diminishes on a percentage basis.”

AMC is hungry to expand into new revenue streams. Back in the spring, CEO Adam Aron said the company expects to launch a food delivery service with Uber as a partner as early as the second quarter as well as launch an AMC-branded credit card later this year.

In April, AMC made headlines in another extraordinary way: It bought a 22% stake of Hycroft Mining (HYMC), which operates a precious metals mine in Nevada. The deal gives AMC 23.4 million shares, each share with a warrant to own more shares, in the company. Apparently, the 71,000-acre mine has 15 million ounces of gold deposits and 600 million ounces of mining-worthy silver.

HYMC has cooled off after leaping 511% in the week ended March 11. Shares currently trade near 68 cents but are angling at a third straight weekly advance.

Gold jumped on Friday amid U.S. dollar weakness. The precious metal currently trades near $1,681 an ounce in the spot market, well off its multiyear high of $2,070.

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Technical Action Today

Even though an epic short squeeze rally hit overdrive in January 2021, AMC stock still attracted short sellers during the summer of that year. Now, after a bruising decline since the spring of 2021, have the shorts let up?

Data from brokerage TradeZero for the week ended Aug. 12 shows that short sales picked up to 7,369 shares at an average cost of 24.69 each. In the week ended Aug. 19, TradeZero clients sold 3,087 shares short at an average price of 21.52. That’s tame compared to what TradeZero saw last year. In the week ended July 23, 2021, AMC Entertainment placed 3rd among stocks trading at least $10 a share and getting sold short the most. A total 14,666 short-sale trades crossed the broker’s platform at an average price of 38.18 per share.

In both October and early November, AMC did not make TradeZero’s top 10 list in heavily sold-short stocks trading under 10 per share.

Meanwhile, check out the 50-day moving average, drawn in red in all IBD charts. Before the disastrous decline in late August, AMC stock spent six weeks trading mostly above this key technical level. Meanwhile, the 50-day line began rising again. No longer the case today, though.

Why does a rising 50-day line matter? In a nutshell, it means that until the second half of August, AMC’s price trend over the past 2-1/2 months had been up. But the 50-day price trend has definitively turned lower.

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Are The Shorts Covering AMC Stock?

Let’s go back to the prior hyper-fast run during the meme stock boom of 2021.

Prior to the giant gain on June 2, 2021, over just five sessions of trade (May 24 to 28), AMC obliterated the short sellers by rising as much as 203%. In the week ended June 4, AMC stock almost finished up 100% or more for a second straight week. Incredible.

In January 2021, WallStreetBets chat-room traders on Reddit joined in unison in buying shares and bullish call options in AMC stock. They did the same in a band of other companies that had been heavily sold short and struggling.

When a stock shows a high level of short interest and is getting bid up, you can almost count on a chain reaction of buying to occur. Why? Short sellers, betting on a decline in the stock, often have to do an about-face. They cover their short position by buying back shares.

According to MarketSmithshort interest — shares sold short by individual and professional investors —  now runs at 4.2 times AMC stock’s daily average volume of 24.7 million shares. That totals 104 million shares. So, short interest now makes up almost 20% of the stock’s entire float of 511.7 million — down mildly from 21% in the spring 2021.

Strong profitability in the future could lead to increasing accumulation by large funds and other institutional investors. A powerful rebound could force short sellers to cover their positions, helping to propel shares even higher.

The NYSE publishes data on short sale positions twice a month. Plus, the short coverage ratio can be skewed by dramatic changes in daily share turnover. The above data also does not consider any shares that may have been sold short in dark pools.

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Key IBD Ratings

For now, AMC’s ratings in IBD Stock Checkup are now showing more bearish tints.

They include a 58 Earnings Per Share Rating on a scale of 1 to 99. A 26 Composite Rating on a scale of 1 (wizened) to 99 (wizardly) has plunged from a decent score of 76 last month but has improved in recent days. Ideally, focus on stocks that show a 90 to 95 Composite score or higher.

Fortunately, AMC’s movies industry group recently shot from the bottom into the top 20 of IBD’s 197 industry groups in terms of six-month price-weighted performance. The Leisure-Movies group now ranks 32nd. That’s pretty good.

Check the daily price-weighted performance of all IBD industry groups, plus rankings based on six-month performance, at IBD Data Tables.

Mutual funds owning a stake in AMC have jumped to as high as 662 at the end of the second quarter this year vs. 190 in Q4 of 2020. But in the third quarter, fund owners have sunk to 626.

Relative Strength Sinking Again

When choosing growth stocks for the biggest potential gains based on the CAN SLIM investment paradigm, focus on those with a Composite Rating of 90 or higher. Shooting for a 95 or higher, particularly at the start of a new bull market, is even better.

However, given that AMC stock is a turnaround play, it makes sense to place more emphasis on relative strength. AMC has that in spades.

In August, AMC held a very respectable 96 Relative Strength Rating. This score means AMC stock has outperformed 96% of all stocks in the IBD database over the past 12 months. And the 3-month RS Rating at the time zoomed to a highest possible 99, according to MarketSmith data. Now, both ratings have shrunk to a disappointing 4 and 14, respectively; but both have been rising lately.

The Accumulation/Distribution Rating is decent at B- grade on a scale of A to E. This rating looks at 13 weeks’ worth of price-and-volume action.

From March to May 2021, AMC created a boxy cup — plenty of time for a solid cup pattern to form. This pattern produces a proper buy point of 10 cents above the cup’s left-side peak of 14.54 on March 18. So in AMC’s case, the correct entry stood at 14.64.

AMC Action In The First Half Of 2021

AMC had to surpass 14.64 before becoming a new buy. A 20% gain on May 25, 2021, sent shares zooming past the proper buy point. The 5% buy zone goes up to 15.37; the stock quickly got extended.

As always, control your risk. Not all breakouts work, especially when the stock market uptrend goes under pressure or into a correction. The best time to buy? When IBD notes the market in a confirmed uptrend, it signifies that buying demand is healthy among institutional investors.

In stock investing, seek the wind at your back, not in your face.

Back in May 2021, this story suggested watching how AMC stock handles potential upside resistance near 20. In fact, the action since that incredible week ended Jan. 29 molded a deep cup pattern. From that vantage point, AMC delivered a second breakout on May 27, surpassing a new 20.46 buy point with fury.

To get this ideal entry in a cup without handle, simply add 10 cents to the cup’s left-side high — 20.36. On May 27, shares rifled past the 20.46 entry. For a while, AMC refused to look back. Still, with gains of as much as 501% in just two weeks, it made sense to lock in at least partial profits.

AMC Stock In 2022: Is It A Buy Now? Or A Sell?

AMC sits 93% below its 72.62 all-time high set on June 2, 2021. So at the current price level, it does not yet trade at an IBD-style entry point. For those who want to go long, watch to see if a new bullish chart pattern will form.

Four months ago, this story noted it could take a while. Given the stock’s plunge, AMC will need weeks, if not months, to build the right side of that new base in bullish fashion.

AMC’s chart shows the general structure of an extreme double bottom. A middle peak of 34.33, standing in between the initial low of 12.90 in mid-March and 9.70 in the week ended May 13, set a technical buy point at 34.43. Yet AMC is nowhere close to breaking out past that entry. Also, the wild swings in price action violate the qualities of a very good base.

An excellent set-up means the big boys and girls on Wall Street are more inclined to buy and hold shares, rather than dump them. And once a strong chart pattern has been established, an IBD-targeting breakout offers individual traders the best opportunity to reap gains immediately at the start of a potential big run.

For a few days in August, the weekly chart showed AMC trying to cross a nearly 12-month trendline that connects the September 2021 peak of 52.79 with lower highs in November 2021 (45.95) and the end of April this year (34.33). For the very aggressive trader, this trendline breakout near 25 offered an uber-speculative entry. Indeed the rally fizzled fast.

So at this point, AMC stock is not yet a buy.

Shares need to do these things first: 1) rise back above the 10-week moving average and steer it higher; 2) overcome a large overhead supply of disgruntled holders ready to sell if the stock climbs back above 10; and 3) display price-and-volume action that signals heavy accumulation by fund managers, not distribution.

Finally, after you buy any stock with solid prospects, heed the golden rule of investing. Keeping losses small keeps you in the investing game for the long haul.

Please follow Chung on Twitter: @saitochung and @IBD_DChung