AMC Stock's Rally Could Be Cut Short

AMC options can be had for a bargain at the moment

Deputy Editor
Mar 30, 2022 at 1:19 PM
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Meme stock AMC Entertainment Holdings Inc (NYSE:AMC) recently rallied from its lowest level since May 2021, logging seven wins in eight sessions. This win-streak helped push the shares above their 80-day moving average for the first time since November. However, the recent pop also pushed the equity right into its historically bearish 180-day moving average, which has resulted in downside for AMC in the past. 

AMC Chart March 30

In a study conducted by Schaeffer's Senior Quantitative Analyst Rocky White, this signal has flashed five other times during the past three years. One month later, the stock was lower 60% of the time, averaging a 16.9% drop. Some of this may already be in effect, as the equity was last seen down 8.1% to trade at $27.08 this afternoon.  

An unwinding of optimism could also put pressure on AMC Entertainment stock. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AMC sports a 10-day call/put volume ratio of 2.67, which ranks higher than 94% of readings from the past 12 months. This is indicative of a healthier-than-usual preference for calls of late. 

Speculating with options looks like the way to go, as premium can be had for a bargain. This is per the security's Schaeffer's Volatility Index (SVI) of 221%, which sits in the relatively low 29th percentile of its 12-month range, suggesting options traders are pricing in relatively low volatility expectations for the security at the moment. What's more, the equity's Schaeffer's Volatility Scorecard (SVS) of 73 (out of a possible 100) indicates AMC's tendency to outperform said volatility expectations during the past year. 

 

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