The AMC stock price has closed higher four days in a row for the first time since June, just before the epic short squeeze that sent the price into orbit. AMC Entertainment Holdings Inc (NYSE: AMC) added 4.12% yesterday, closing at $37.16, a gain of more than 25% since last Wednesday.
As has been the case with AMC over the last two months, just when it seems the stock is about to collapse and break the hearts of the Wallstreetbets crowd, it roars back to life. Last week, AMC was sold heavily, following Q2 earnings and discovering that Crispin Odey had taken a short position in the cinema group. However, as I suspected, the AMC stock price has reversed from support and may soon embark on another rally. Furthermore, the last time AMC posted a 4-day winning streak, the stock was 175% higher within three days.
Crispin Odey, the London-based permabear, is the latest hedge fund heavyweight to take on the retail army. Odey, who manages around $4 billion, is seemingly on the right side of the trade so far, having opened the position ‘recently. Whether he continues to be on the right side of it is debatable, as is the level of short interest in the stock.
Depending on where you look, the short interest is anywhere between 8 and 18%. There seems some ambiguity and possibly some shenanigans surrounding the level of short interest. Retail Investors claims of position transfers and the creation of fictitious shares via questionable market-making practices shine a light on short-sellers, as does the use of dark pools, which is being closely looked at by the Securities and Exchange Commission. At the moment, both sides of the trade make a valid argument, and it’s hard to find a definitive answer as to just how short the stock is. However, the price action suggests the stock is still trading with a short bias.
The daily chart shows that during the weakness at the start of the month, the AMC stock price held the 100-day moving average at $29.78 and a supportive trend line. The trend represents the lower edge of a descending wedge formation, in place from the June high. Now at $27.55, the line is an important level of support, and a close below would signal a return to the 200 DMA at $17.70.
However, the recent price action suggests AMC may test the shorts resolve and visit the top end of the descending wedge at $41.00. A clearance of this level targets the 50-day moving average at $44.20 and, following that, the all-time high at $72.62.
How this plays out is anyone guess. However, I have a feeling there is a lot more to this story than meets the eye.
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