By now you’ve probably heard all the hype surrounding AMC Entertainment. If you’ve been following me for a while then you know I’ve been covering AMC since the beginning of February.
It is absolutely amazing to see more and more people begin to invest in the stock market. You can bookmark this step by step guide on how to invest in the stock market in case you haven’t opened your brokerage account yet.
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Why are people investing in AMC stock?
People have the chance of a lifetime.
AMC was forced to close its doors to the world when the pandemic hit. AMC Entertainment suffered huge losses and hedge funds began doubling up on their short positions in attempts to bankrupt the company. Their goal was to get rid of the most respected movie theater franchise of all time, profit, and wash their hands clean.
Retail investors gathered on subreddit communities and decided to buy the stock and drive the price up; like they did with GameStop. This teamwork caused a gamma squeeze driving the price action from $2 up to $20. This allowed AMC Entertainment to raise enough capital for bankruptcy to no longer be on the table.
Since then, AMC Entertainment has been able to raise more than $2 billion dollars from life long partners. These partners have supported AMC since the inception of the company 100 years ago.
Retail investors saved AMC and are now looking to squeeze short sellers out of their positions.
AMC is currently the heaviest shorted stock in the market
Analysts discovered that AMC has a massive short squeeze potential. A short squeeze is a massive move up in price action. Short squeezes are violent and may produce 100%, 1,000%, and 10,000%+ gains.
What we discovered is that hedge funds shorting AMC Entertainment were overleveraging their positions. Meaning they were borrowing shares from brokers at an interest to drive the price down.
Short selling is the process of borrowing a share, selling it much lower, and profiting the difference when they pay back their lender. Short sellers usually bet on the price of a stock to tumble.
Here’s an example of short selling
AMC’s stock price was around $30 back in the booming party economy of 2016. Say short sellers borrowed 10 shares of AMC for $300 betting it would drop. Shorts would then sell the stock at the market value of $300 (you and I purchase it at $30) and wait for it to drop in due time. If the stock price fell to $25 per share then the short seller could buy back those 10 shares, profit the difference ($50) and give back the 10 shares they borrowed back to the lender.
AMC stock is going up, what happens then?
Here is what’s attracted millions of retail investors and huge institutions such as Wells Fargo, Vanguard, Morgan Stanley and many more to AMC Entertainment.
AMC stock is no longer on the brink of bankruptcy and it is having an extremely healthy bullish run. The reason we’ve seen consolidation and red days is due to the massive amount of short ladder attacks conducted from short sellers and hedge funds.
A short ladder attack is a method used by short sellers where they transact synthetic shares amongst one another to drive the price of a stock down. This is only one of many ways we’ve seen foul play in the stock market.
Hedge funds shorting AMC are losing millions of dollars every day they don’t close their positions
Now here’s where it gets interesting. What happens to short sellers when a stock they’re shorting is going up instead of down?
The fee to borrow the share from their lender goes up and they’re pressured with two options.
- Pay the short borrow fee and continue to hold your short position in hopes the stock price will go back down, or
- Close your position, take your profit or loss, and possibly go long instead
Now, hedge funds such as Citadel and Melvin Capital have been quite stubborn. They’ve continued to overleverage their short position in AMC Entertainment to drive the price action down.
However, the AMC community isn’t leaving. It’s personal now and they’re willing to buy and hold the stock until shorts are squeezed out of their positions. Analysts have figured out that retail investors can continue to drive the price action up with enough volume in the stock.
Recently, there’s been a surge of new retail investors buying AMC stock. Short sellers keep tackling the upticks every time AMC soars. However, retail investors continue to buy the dips causing consolidation. AMC stock is currently trading around $40.78. The stock has been on discount recently but it continues to go up.
The data shows a MOASS
MOASS, mother of all short squeezes.
Brokers have never seen this much shorting occur in a single stock in the existence of the stock market. The data predicts a short squeeze unprecedented like anything we’ve ever seen historically.
This is primarily due to the amount of synthetic shares and overleveraged positions that must be covered during a margin call. A margin call could force shorts out of their position resulting in a short squeeze.
How high can AMC’s stock price go up to? There’s no ceiling. However, more data will be released as the stock begins to squeeze.
Related: How high can AMC stock price skyrocket up to?
Markets are being liquidated
Massive institutions have begun to liquidate assets in both the stock market and crypto market. Retail investors cannot cause the extreme price drop we’re seeing in both markets.
I speculate institutions are building capital to prepare for margin calls or raised margin requirements.
Proposal ICC-007 APPROVED
This proposal provides brokers with the flexibility to raise margin requirements on investors holding risky investments, such as a short position in AMC.
Brokers need collateral. If short sellers cannot meet the margin requirement then they will be forced to liquidate their entire positions, resulting in several gamma squeezes and inevitably a short squeeze.
If margin requirements are raised then shorts will have to either deleverage their positions (gamma squeezes), or fund their accounts with capital. Is this massive selloff in both the stock market and crypto market related to potential AMC margin calls and regulations? I think so.
Read: How soon will hedge funds get margin called? (AMC)
An abundant opportunity
The reason why retail investors are buying AMC stock is for the opportunity of a lifetime. Not only is the public starting to invest but big institutions on retail investors’ side known as ‘whales’ are bulking up on the stock.
“Beware of the stock” (paid) articles
Platforms such as the Fool, MarketWatch and InvestorPlace are hedge fund affiliates. Retail investors encourage newcomers to do their own due diligence oppose to reading FUD articles (fear, uncertainty, and doubt).
Is it too late to buy AMC stock?
That depends. Look at AMC’s current share price. If it squeezes to $100, $1,000, or even $10,000+ would the trade have been worth it if you bought today at it’s current share price? You decide.
More info on AMC stock
Here’s where you can find more helpful information regarding AMC stocks’ data & predictions, technical analysis.
On the very top right part of my blog you can see my top 6 articles at the moment are on various AMC posts. These posts go further into detail with DD (due diligence) surrounding AMC stock and the short squeeze data.
Related: Charles Schwab raises margin requirements for AMC and GME stock
Best YouTubers covering AMC Entertainment stock
Trey’s Trades
Credit will be given where it’s due. Trey’s Trades is the man, the leader of this AMC movement. Nothing but tremendous respect for this brother. Take the time to watch his videos, I promise you you will not regret it.
Roensch Capital
For less entertaining but otherwise very valuable information on AMC stock, watch Roensch Capital. RC provides commentary on chart analysis.
ReviewDork
I was quick to connect with Gabe from ReviewDork. His videos are honest, genuine, and entertaining to watch. This channel is currently one of my favorites covering AMC and I know you’ll enjoy Gabe’s videos as well.
Questions regarding AMC stock?
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How come I see other stocks with a higher percentage of short rate then AMC and nobody mentions them. What am I missing
You’re awesome!!
You’re awesome brother!