Wasn’t AMC supposed to skyrocket during an economic downturn?
AMC’s negative beta is -45.9% after all.
So, why isn’t AMC stock outperforming the market?
AMC is up more than 61% in the past year but down more than 45% this year.
Apes are wondering, what’s taking AMC so long to skyrocket?
Let’s discuss it.
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Liquidity in the markets has dried up
Money isn’t circulating in the markets like it was last year.
Financial institutions are liquidating positions left and right to keep up with increased margin requirements.
Massive selloffs are causing the markets to bleed heavily.
The DTCC just published B16845-22 which raises margin requirements by 25% for companies trading above $10.
For prices between $7.50-$9.99 per share, margin requirements will increase by 30%.
There will be a 50% margin increase on stock prices between $5.00-$7.49, and a 100% increase on stocks with prices below $5 per share.
This puts more strain on the market as financial institutions struggle to meet margin demands.
Hedge funds have been facing losses all year and even begun shutting down, as seen with Melvin Capital.
Institutions could be liquidating several stocks to keep their short positions open in heavily short stock such as AMC or GME stock – which explains why shorts have not closed their positions.
But how long will they allow themselves to be stretched before taking the entire markets down?
Related: Hedge Fund Melvin Capital Is Shutting Down in June
Institutions continue to short AMC stock
Today marks the third day in a row institutions have borrowed less than one million shares to short AMC, via Stonk-O-Tracker.
Short sellers were borrowing millions every day to short AMC stock prior to the sudden decrease.
But why has this recently gone down?
AMC’s short interest is still relatively high at 19%.
Is it possible institutions are finally being capped for borrowing shares that aren’t available in the market?
I’d love to hear your thoughts on this.
AMC currently has more than 133 million shares on loan – or shares on loan that have yet to be returned or bought back.
AMC’s shares on loan have been the highest they’ve ever been.
For those who thought AMC’s short squeeze was done, simply look at the data.
Short sellers have to close their positions eventually and either take profits, break even, or cut their losses.
AMC will rally up as short sellers close these positions.
Will shorts close positions in this bear market?
It would be in the short sellers’ best interest to close positions before the market goes through a reversal.
AMC has shown a strong level of resistance in the $14-$15 range.
Short sellers didn’t close their positions at $5 per share and let the floor go up instead.
So, although AMC has taken quite some time to move up again, the chances of a short squeeze has also increased due to the current market conditions.
The question is how much more will financial institutions bring down the markets before closing short positions in heavily shorted stock such as AMC.
Will they prolong the process and leave their hand in the fire?
I’d love to hear your thoughts on this.
If they don’t use these all-time lows to close their positions now, bull rallies during a reversal will do a lot of harm to pockets later.
Related: Will AMC Entertainment Stock Reach a New ATH This Year?
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The stock will never skyrocket like everyone thinks it will because the money people (hedge funds) are in bed with the government (SEC). They will never ever slit their own throats….
I am heavy into GME so I really hope so but where do you get 1300% from?
Lol who cares about amc just go into gme which is 1300% shorted…
Thank you Frank! I appreciate your articles!
Great post again, Frank, as always you are one of only a few who is honest, makes sense and on our retail side. The question I have for you, with mainly GME & AMC in mind, is ‘what do you think the realistic chances are of a MOASS happening in either stock and what options to the HF’s have of avoiding at least high upward swings. In other words in your opinion is it inevitable or can they dodge the situation somehow?
Hallo Frank! Thanks for this article. But, I see it as Ashley. Please can you work out better for us, why the negative beta don’t play a more important role. I think its still not enough, we need much more bearmarket.
Hi Frank! I love your content! You forgot to elaborate on why the high negative beta hasn’t outperformed the market. I would love your thoughts on this because no one else is talking about it.
Hey Frank love your articles, thank you for always keeping us informed on what’s going on, but what exactly would cause a market reversal? and when would you guess it would happen? t
Let’s start a discussion! Leave your thoughts below.