Benzinga - AMC Entertainment Holdings, Inc (NYSE: AMC) was retracing almost 2% lower in the premarket on Tuesday but opened flat and started to move higher after the opening bell.
On Monday, the theater chain printed a hammer candlestick on the daily chart, which suggests a bounce may come.
A hammer candlestick pattern forms when a red or green candlestick prints with a long lower wick and a short upper body, which resembles a hammer.
A hammer candlestick, when found in a downtrend, can indicate a reversal to the upside is on the horizon. It is a lagging indicator, as the next candle on the time frame being studied must print before the pattern can be validated.
A hammer candlestick doesn’t necessarily mean a new uptrend will occur, only that a bounce higher is likely imminent.
Candlestick patterns can be used to indicate the future price direction of a stock. Candlestick patterns are especially useful for technical traders when they are combined with other indicators such as larger patterns, trading volume, relative strength index (RSI) and divergences between RSI and price action.
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The AMC Chart: AMC reversed course into a downtrend on April 14 when the stock topped out at the $5.76 mark. The downtrend was confirmed on April 17, when AMC printed a lower high at $5.30 and on Monday when the stock formed a lower low at $4.63.
- The hammer candlestick AMC formed on Monday was printed on higher-than-average volume, which demonstrates bulls came in to buy the dip when the price dropped under the psychologically important $5 level. If AMC fails to bounce on Tuesday, the second most likely scenario is the stock prints an inside bar pattern to consolidate.
- Bulls want to see big bullish volume come in and drive AMC up above $5.30, which would negate the downtrend. Bears want to see big bearish volume come in and drop AMC to close a trading session under $5, which could indicate the bears have taken control.
- AMC has resistance above at $5.23 and $6.33 and support below at $4.31 and $3.56.
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