AMC Entertainment Holdings Inc (NYSE:AMC) and Cinemark Holdings, Inc. (NYSE:CNK) were falling more than 3% and 1.3%, respectively, at one point on Friday despite the release of the latest Batman movie opening in theaters last weekend.
“The Batman” is expected to be a top-grossing film this year and globally the Batman franchise has raked in more than $5 billion in revenues.
AMC and Cinemark have both plummeted from their all-time highs, with AMC plunging about 79% from its June 2, 2021, all-time high of $72.62 and Cinemark tumbling more than 65% from its all-time high of $45.68, printed on April 6, 2015.
Soaring ticket and concession prices combined with the increasing number of movies available on streaming services over the past years has contributed to a decline in moviegoers and AMC and Cinemark have suffered.
Even though the two theater-chain stocks started to flash signs a reversal to the upside may be in the cards, AMC has developed bullish divergence on its daily chart and Cinemark is trading in a falling channel. A bounce in AMC appears to be more imminent while a reversal in Cinemark’s stock may take more time.
It should be noted that events affecting the general markets, negative or positive reactions to earnings prints and news headlines can quickly invalidate patterns and breakouts. As the saying goes, "The trend is your friend until it isn't," and any trader in a position should have a clear stop set in place and manage their risk versus reward.
The AMC Chart: AMC has developed exaggerated bullish divergence on the daily chart, which indicates at least a bounce may be on the horizon. An exaggerated bullish divergence occurs when a stock’s lows remain flat while the relative strength index forms a series of higher lows.
- On Friday, when AMC slid to its low-of-day at the $14.31 level, the stock ran into a group of buyers. When paired with similar price activity on March 8, AMC has printed a bullish double bottom pattern at the level, and if the pattern is recognized, higher prices may come on Monday.
- If AMC is above the $14.80 level, it will print a hammer candlestick, which could also indicate higher prices will come on Monday.
- The stock is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, which is bearish. Bullish traders may decide to wait to enter into a position until the stock has regained the two EMAs as support.
- AMC has resistance above at $14.96 and $17.07 and support below at $12.22 and $9.90.
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The Cinemark Chart: Cinemark began trading in a falling channel on Feb. 15. On Friday, the stock attempted to break up bullishly from the pattern but rejected the upper descending trendline. A falling channel pattern is considered bearish until a stock breaches the top of the formation on higher-than-average volume, which can indicate a large reversal to the upside is on the horizon.
- On Friday, Cinemark was trading down on lower-than-average volume, which indicates the stock may be running out of sellers. By early afternoon only about 596,000 shares had exchanged hands compared to the 10-day average of 3.34 million.
- Cinemark has resistance above at $16.56 and $18.16 and support below at $14.78 and $13.37.
Photo: DC Comics
