AMC Entertainment Holdings Inc. and GameStop Corporation have both been trading in bearish downtrends since Nov. 23, making consistent lower highs and lower lows.
On Monday, AMC and GameStop plummeted about 15 percent and 16 percent, respectively, and on Tuesday both stocks were attempting to erase some of their losses. The two retail favorites were due for a bounce because their relative strength indexes (RSIs) were measuring into oversold territory near the 30 percent level, which Benzinga predicted in reference to AMC’s stock on Monday.
AMC and GameStop both have a lot of work to do to buck their downtrends, however, but it should be noted that events affecting the direction of the general markets, positive or negative reactions to earnings prints, and news headlines about a stock can quickly invalidate patterns.
As the saying goes, “the trend is your friend until it isn’t,” and any trader in a bullish or bearish position should have a clear stop set in place and manage their risk versus reward.
The AMC Chart
AMC broke bearishly down from a bull flag pattern on Dec. 9 and has since plummeted about 20 percent.The stock’s most recent lower high was printed on Dec. 8 at the $33.92 level and AMC’s most recent lower low was created on Tuesday at the $20.80 low-of-day.
AMC will need to eventually print a higher low to continue in the downtrend unless it can climb up over the Dec. 8 high-of-day and reverse into an uptrend.
Traders can watch for an inside bar to develop on Wednesday as the stock consolidates the recent volatility, and a break of the inside bar will allow traders to gauge the stock’s next immediate direction.
AMC has heavy resistance above at $25.79 and $29.45 and support below at $20.36 and $17.07.
The GameStop Chart
GameStop has been trading in a downtrend within a descending channel since Nov. 24.The top descending trendline of the pattern is likely to act as resistance and the lower trendline as support.
If GameStop is able to push up above the top trendline of the pattern, it could run higher as it did on three previous occasions after trading in a descending channel.
GameStop’s most recent lower high was printed on Dec. 7 at the $181.98 mark and the most recent lower low at the $129.50 mark on Tuesday.
The stock has resistance above at $145.22 and $166.70 and support below at $118.62 and $91.50.
