Benzinga - AMC Entertainment Holdings, Inc (NYSE: AMC) was trading almost 2% higher in the premarket on Friday after popping up 2.25% on Thursday on continued strength following a strong Easter weekend at the box office.
The theater chain has spent the last three days, mostly consolidating sideways on decreasing volume. The trading pattern has settled AMC into 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 charts 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.
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The AMC Chart: AMC surged 47% between April 5 and the high-of-day on Wednesday, where the stock topped out at $5.74. On Thursday, AMC traded within Wednesday’s trading range, which caused the stock to develop its inside bar pattern.
- The inside bar leans bullish in this case because the stock was trading higher before forming the pattern. Traders and investors can watch for the stock to break up or down from Thursday’s mother bar on higher-than-average volume to determine future direction.
- The consolidation pattern has been taking place just above the 50-day simple moving average (SMA), which is also bullish. If AMC continues to consolidate above that level and then moves higher to confirm a new uptrend, the stock is likely to find its next resistance at the 200-day SMA.
- Bearish traders want to see big bearish volume come in and break AMC down from the 50-day, which could indicate the recent trading action was a bull trap. If that happens, bullish traders can watch for the stock to eventually print a bullish reversal candlestick, such as a doji or hammer candlestick, for a possible entry into at least a short-term bounce.
- AMC has resistance above at $6.33 and $7.47 and support below at $5.23 and $4.31.
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