Hey guys/girls/old apes/baby apes/tards and autists,
For those of you following AMC daily, what a week, right? We have had some pretty intense price action out there and since I posted last week, I’ve been flooded with private messages from some of you guys wanting more information as we go along to help you understand where this market is going. Just to be clear, I am not your financial advisor and you really should invest based on your own analysis of the stock and risk tolerance. I know there is a lot of information going around out there and it can be confusing for people. Now more than ever, the use of technical tools helps us make choices not based on fear and greed, but on logic and the balance of probabilities. That being said, here is my view of the past week with AMC using volume and price as my guide.
On the weekly chart, since the breakout from the HTF (high tight flag), we have quickly reached my initial target of 63.96$. The real body of last week’s candle is longer than the previous week’s on slightly higher volume which is normal. It means Wyckoff’s law of effort and result still suggests the price action is in harmony with its associated volume. For a stock to rise, it needs effort (represented here as volume). So here we have rising price action with rising volume which is good. I am a little bit concerned about the long upper wick on this candle, though, because this suggests there is quite some selling happening here. Could be a mix of price suppression, professionals taking money off the table, and some retail booking profits/panic selling. For sure, what this long upper wick tells me is that the bears have not given up yet and we are not out of the woods. The good news here is that the heavy resistance we found at 35$ got blown out of the water on very high volume. So whatever happens, we now have VERY HIGH support at 35-36$ (resistance becomes support when broken).
Moving on to the daily chart, candle #1 is a very important candle. I see a very long white body with rising volume which is excellent. I want to bring your attention to candle #2. When I compare these two candles, I see that candle #1 has a way bigger body than #2 but only slightly higher volume. This tells me that bears have capitulated at these levels (35$-36$) and price could move smoothly without much resistance, which is very bullish. Keep in mind that long white candles on very high volume offer a lot of support at around half the real body if a retrace would occur (around 50$). The upper wick suggests some selling was happening here, but nothing that concerns me. Candle #3 is a black spinning top and suggests indecision by market participants. It coincided with a lot of FUD being laid out there and investors were trying to digest all the information that was being poured out by the media (by the way, trading the news is a bad idea… just saying). I like that the lower wick is longer than the upper wick which suggests more buying than selling is happening. I believe a lot of weak hands were stopped out of their positions during this day (for the newbies out there, placing your stop loss too high will most likely result in closing your positions in highly volatile stocks as you may have experienced). The spinning top closed at 51.34$, suggesting the 50$ region acted as support here. I am not surprised of this pullback because we hit around 90 on the RSI Wednesday and a lot of traders look at this indicator to book profits. Candle #4 is an inverted hammer and suggests weakness. It acts as a bearish continuation 65% of the time, but it’s really not a candle I find very reliable. Although the current price action suggests some weakness in the last 2 trading days, the good news is that the volume is dropping significantly and thus suggests this is a short-term pullback in a major uptrend (remember Wyckoff’s law of effort and result). We can confidently HOLD our long positions in this stock because the likeliest outcome is for the uptrend to resume soon once all the weak hands are weeded out of this stock. Some could argue that the start of a bull flag is being printed on the chart as well, which is good news once it breaks out to the upside.
On the 30 minutes chart, candle #1 signals stopping volume with the long lower wick on the down candle at the 42$ region on above average volume. This short-term downtrend was stopped at the 40$ region with a hammer candle on high volume at #2. Shorter candle on higher volume suggests a lot of buying is happening at the 40$-42$ region and thus this is very strong support for us. Professionals were buying heavily here.
Lastly on the 60 minutes chart, we see in the last part of Thursday and Friday a small downtrend on declining volume suggesting divergence in Wyckoff’s law of effort and result. This downtrend is weak and will not last very long. For those who have not yet jumped on this rocket, you have another opportunity to hop in at an interesting price (currently around 48$). I still believe we are currently trading at a discount on AMC. For conservative traders, I see very strong support at 40-42$, but you could miss out on the rally if we do not retest this region. For those of you already strapped on your rocket ship seat, we HOLD THE LINE! This stock has A LOT more upside risk than downside risk at this point and we are merely in a small consolidation zone which is normal after a significant rally. Stocks do not trend in a straight line. During the whole week, I did NOT sell any of my call options even though they reached +1000% at some point. This is not the action of greed, but confidence that price action and volume support a lot more upside on this stock. Selling too soon is as bad as selling too late. I am so confident in this trade that I will be buying the dips next week to average up on my position AGAIN.
TLDR: Volume and price still in harmony. Buy the dips. Strong support at 40$-42$. Short-term downtrend in a major uptrend still intact. WE HOLD THE LINE!!!!
AMC 20$ 07/16C
AMC 30$ 07/16C
AMC 40$ 08/20C
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