How The AMC Squeeze Compares To The GameStop Run: Are Buyers Just Playing A Game?

How The AMC Squeeze Compares To The GameStop Run: Are Buyers Just Playing A Game?

AMC Entertainment Holdings Inc (AMC) held on to its weekly gains in early afternoon trading on Friday after a sharp pullback in Thursday’s session. Heading into next week, AMC traders will be asking themselves if this week’s run-up is a repeat of January's trading action in GameStop Corp. (GME), or if the rally in AMC had legs.

Deja Vu? 

GameStop shares hit their all-time high of $483 on Jan. 28. In the month leading up to that peak, the stock rallied about 1,560%. This week, AMC hit its all-time high of $72.62. In the month leading up to that peak, AMC shares gained just 523%. However, AMC’s year-to-date gains are now 2,330%, while GameStop’s 2020 gains are just 1,260%.

In the month following GameStop’s run to $483 back in January, the stock tumbled 78.3%. If AMC suffers a similar fate, the stock could be back down around $15.75 within a matter of weeks.

Voices From The Street

Michael Batnick, Director of Research at Ritholtz Wealth Management, wrote in a blog post on Thursday about how the current AMC mania appears to be very similar to the mania that sent the stock soaring more than 800% in the first 17 days of 2021. “Buyers are just playing a game with tickers on a screen. The madness can continue as long as people think they can get out before the collapse,” Batnick wrote.

David Trainer, CEO of New Constructs, didn’t pull any punches in discussing the true value of AMC shares this week. “The surge in shares of AMC Entertainment is yet another sign of the reckless, meme stock-driven investing landscape that we find ourselves in today,” Trainer said. “We think AMC Entertainment's stock is worth $0 per share, given its weak earnings, dilution from recent stock offerings, and mountain of debt.”

Themis Trading's Joe Saluzzi told Benzinga the trading action in both AMC and GameStop in 2021 is a sign regulators need to step in. “During the ‘Gamestopped’ Congressional hearings, SEC Chairman Gensler indicated that the Commission would be publishing a report this summer on the volatile trading events that occurred in late January. Market participants are anxious to see this report, but it looks like the SEC may already need to update it to include the events of this week,” Saluzzi said.

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William K. 2 weeks ago Member's comment

Interesting scenario, But who are the players? " the majority of AMC’s trading volume came from large institutional block and sweep trades in both the stock and option markets." and what is their motivation???

Anne Davis 2 weeks ago Member's comment

So retail didn't sell off, institutions traded billions of shares amongst themselves.