Parabolic arc patterns are rare. However, if you compare AMC’s current state in the market, it looks identical to this type of pattern. There is something you should know though, it’s not what it seems.
You see, we just got off this parabolic arc pattern and I’m going to explain why. Here’s what all this means.
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What is a parabolic arc pattern?
A parabolic arc pattern is a chart pattern where you see extremely bullish action push a stocks price up. These are usually rare and are caused by a strong buying rally during a mega bull trend.
And rare indeed. What is occurring at the moment with AMC and GME is in fact rare. Most retail investors seem to be misunderstanding this information, however. The arc in a parabolic arc pattern is not the swing after the dip.
But rather the climb up before the dip. This staircase up is what is referred to as a parabolic arc. It’s where retail investors buy every pullback causing momentum to drive the price up.
In the chart above you can see an example of a parabolic arc pattern being compared to that of AMC’s current state. The parabolic arc was the road to the $70 range. Usually what happens during this pattern is the stock tumbles due to massive selloff.
This climb we experienced could be seen as the ‘fake squeeze’. The reason being is we know the ape community did not sell due to charts indicating an extremely low turnover ratio.
A low turnover means that retail investors holding AMC stock have been holding. No one has been selling. Was this parabolic arc pattern fabricated? I wouldn’t doubt it.
What does a parabolic arc pattern mean for AMC?
According to NewTraderU, the rise from this parabolic arc pattern may last anywhere from several weeks to even several months, which AMC has. However, if we compare Tesla’s chart above to that of AMC’s, we already went through this parabolic arc pattern. That dip in the chart is where we just were.
The cup handle to the far right could be very well where we are going. AMC has begun moving in an upwards trend after this dip. In the past, Trey’s Trades has referred to Tesla’s technical setup in the chart above as a very slow squeeze. However, this does not seem to be the case looking at it from this perspective. This was simply momentum buying and fomo buying, not a short squeeze.
So what does this mean for AMC? Are we still squeezing?
Before we get there, we need to understand what happens after a parabolic arc pattern phase. And what actually ends up happening is that the stock begins to make another bullish climb in an efforts to find the top before ultimately making its way back down due to nature of investors selling off.
We are apes, however. And those paper hands who sold off cannot bring the stock back down any more. If retail investors continue to hold the stock there’s a chance the momentum may continue upwards. No selloff means no dip.
This natural move up will not be AMC’s short squeeze. But it will certainly lead to it. Why? Because short sellers will be upside down with losses as retail investors begin to see massive gains again.
Margin requirements will continue to attack them and eventually force them to liquidate their positions. They will have no choice; brokers will collect their money before they lose it.
Could this be the catalyst we’ve been waiting for?
It is certainly a possibility. The game plan hasn’t changed apes. We hold until shorts get squeezed out of their positions. This is really happening.