AMC Entertainment Stock Down 32% in December – Time to Buy AMC Stock?

The price of AMC Entertainment stock is down 32% so far in December following the latest weakness that high-risk assets have been experiencing amid expectations that the Federal Reserve could tighten its monetary policy in the wake of elevated inflationary pressures.

Not much has happened to the company itself during this period except for a couple of developments including the launch of a non-fungible token (NFT) for shareholders that says “I Own AMC” – kind of like a badge of honor for retail investors who have piled onto the meme stock during this year’s frenzy.

According to the company, a total of 425,000 individual investors have registered for its AMC Investor Connect Program. All of them will be entitled to receive the NFT via de Worldwide Asset eXchange (WAX).

Other than that, AMC reported back on 30 November that it experienced its biggest post-pandemic ticket sale during the release of the new Marvel title “Spider-Man: No Way Home”.

The company collaborated with Sony Pictures to produce a total of 86,000 NFTs related to the movie that were made available to Investor Connect and other VIP program members. These NFTs were fully allotted and strongly contributed to this record sale.

Considering the absence of catalysts that might be fueling this latest decline in AMC stock, what could be expected from this meme stock as we are heading to a new year? In this article, I’ll be assessing the price action and fundamentals of the movie theater operator to draft plausible scenarios for the future.

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AMC Entertainment Stock – Technical Analysis

The price of AMC stock has been on a downtrend ever since it hit its June 2021 all-time high of $72.62 per share as the influence of retail investors on the narrative of this stock seems to have diminished.

A series of lower highs indicated weakness in the mid-term outlook for AMC and this has ultimately led to a break of the $29 horizontal support – retest included.

The retest is one of the factors that make yesterday’s steep decline quite concerning as market participants may have trapped bulls earlier in the month after the price reclaimed the $29 level to then dump their holdings and cause this latest pronounced decline.

Trading volumes during yesterday’s stock trading session doubled the 10-day average and the stock may now be in free fall as there are no horizontal supports that can cushion the decline.

Both the Relative Strength Index (RSI) and the MACD are posting their worst readings in many months and everything is pointing to an upcoming meltdown in a stock that has been a favorite for retail investors throughout the year.

Based on the current technical setup, the downside risks for AMC stock seem huge with a mid-term target set at the low 10s and possibly at $9 per share resulting in a potential 62% decline.

That said, data from Finviz indicates that short interest for AMC Entertainment stock is standing at 18.6%. However, trading volumes are now much higher than they were back in January and June and that reduces the amount of time that it will typically take short sellers to cover an open position.

With this in mind, odds are not favoring a short-squeeze at the moment or at least not one that can last more than a few days. This favors the bearish thesis outlined above and increases the risks of a sustained decline in the value of AMC stock.

AMC Entertainment Stock – Fundamental Analysis

One particular event that may have prompted the latest decline in the price of AMC stock is the decision of its Chief Executive, Adam Aron, of selling a total of 312,500 shares in the company at a price of $30.9 per share on 9 December.

Meanwhile, data from GuruFocus indicates that a total of 14 insider sales took place in November along with another 2 transactions recorded in December – including Mr. Aron’s operation.

This kind of activity may have been interpreted as a sign of weakness in the stock’s outlook as senior officers could be cashing out at a time when the market seems to be encountering some turbulence.

In total, Mr. Aron has liquidated a large portion of his stake in the company as he has sold a total of 937,500 shares in less than two months while he currently holds only 95,997 shares valued at $2.2 million based on today’s pre-market price.

From a fundamental perspective, having a top officer like Mr. Aron cashing out like this is typically considered a sign that the market price is heavily distorted. Some investors may have arrived at that same conclusion and they could have decided to cash out on their 2021 gains before they evaporate.

All things considered, the outlook for AMC Entertainment stock is quite bearish and those who are sitting on significant profits should consider the possibility of selling some of their holdings before it is too late.

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