AMC Entertainment Holdings, Inc (NYSE:AMC) opened lower on Wednesday, but dip buyers caused the stock to trade mostly flat by press time.
The morning weakness was triggered by data released from the Bureau of Labor and Statistics that showed inflation soared 9.1% year-over-year in June, which slammed the stock market as a whole.
AMC has shown relative strength recently, in comparison to the S&P 500, as the latter is trading down about 2.5% off the July 8 high-of-day. AMC has been swinging higher since July 7, soaring almost 28% off the $12.41 level hit on that date.
AMC looks set to soar higher still because on Wednesday, the stock was printing an inside bar pattern on the daily chart. An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.
An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar, and each is called an "inside bar."
A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.
- Bullish traders will want to search for inside bar patterns on stocks that are in an uptrend. Some traders may take a position during the inside bar prior to the break, while other aggressive traders will take a position after the break of the pattern.
- For bearish traders, finding an inside bar pattern on a stock that's in a downtrend will be key. Like bullish traders, bears have two options of where to take a position to play the break of the pattern. For bearish traders, the pattern is invalidated if the stock rises above the highest range of the mother candle.
Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.
The AMC Chart: AMC’s inside bar leans bullish because the stock was trading higher before forming the pattern. Traders and investors can watch for AMC to break up or down from Tuesday’s mother bar on higher-than-average volume later on Wednesday or on Thursday to gauge future direction.
- AMC is also trading in an uptrend, with the most recent higher low printed on Monday at $14.07 and the most recent confirmed higher high formed at the $15.32 mark on July 8. If AMC breaks bearishly from the inside bar pattern, bullish traders can watch for a reversal candlestick to form above the $15.40 mark and if AMC breaks bullishly from the mother bar, traders can watch for AMC to confirm its next higher high over the coming days.
- AMC is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. The stock is also trading above the 50-day simple moving average, which indicates longer-term sentiment is bullish.
- AMC has resistance above at $17.07 and $20.36 and support below at $14.68 and $12.22.
See Also: Exclusive: AMC Ape Matt Kohrs Says, 'Short Term, My Prediction Is Just Crazy Volatility'
Photo: Courtesy of Brecht Bug on Flickr
