Gaming or Movies? Check out $GME and $AMC – May 25, 2021GME AMC
I want to look at a couple of stocks today. Both of these are from the WallStreetsBets Reddit community. They love GameStop ( NYSE: GME ) and they love AMC ( NYSE: AMC ), so let’s take a look at these.
Yesterday I put this stock ( NYSE: GME ) on my Active Trade List. It is a list that I keep over at Stock Market Mentor giving people our entries, our stops, and then tracking the trade. I saw how this was trading yesterday. The thing that kind of got my attention is, if you look at the 20-day moving average of volume down here. You can see what it is, it has been going down for a while, drifting really, really low, which is what you want to see when a stock is in a volatility squeeze when it’s in a tightening pattern. That is exactly what you want to see, like, I’m getting bored, there is nothing happening here. The volume kind of tapers off, nobody feels very strongly one way or another. Some people are buying, some people are selling. They are fine with the price where it is. So it is just really nothing happening. That’s what we like to see, this kind of narrowing low volume if you want to call 9 million shares low volume.
This is the other thing I have going. The moving average of volume, the 10-day moving average. You can see all during this move here in volume. Volume has declined, the 10-day moving average was leading that decline. The same thing here, you see the stock peaked here, it probably peaked somewhere right up there. Let’s take a look, I am not going to say a probably, that it probably peaked on this day. No, you actually got some pretty fair warning. I didn’t plan on going back and analyzing this whole chart, but we will just look at it this way, we might as well, what the heck, I am not limited here, there is no commercial sponsor.
This stock right here, this big, big move here. You saw the first one here. I don’t know what “Vlad” was doing back there, we get this big move here. People are freaking out because hedge funds that were stupidly short by 300 leverage or something, are losing their asterisk. It couldn’t happen to a bigger bunch of idiots. Anyway, the stock goes up here, look at this massive volume. The next day it goes up more but the volume is still massive but not like it was before. And then the following day you get the first little pullback to where shorts would actually be emboldened. You look here and you go, okay, finally it’s done, now I am going to short this way, way, way overvalued stock.
And then WallStreetsBets gang goes, we’ll see about that. And then the stock kind of grounds sideways here but look at the volume. The volume was declining, still super high. Look at the 10-day moving average here, still very high but declining. I don’t really care what the volume is, I care what the volume is relative to what it has been before. So then we keep going here, and again, a big spike up. Look at the volume, now look at the 10-day moving average of volume, this is declining. It is still super high, way high above the 20-day moving average of volume.
Let’s get through the rest of this; all this while that the stock is pulling back what’s happening? The 10-day moving average of volume falls below the 20-day so this current volume is lower than the average and then it just kind of stays there. It still kind of stays there, basically. Now we are into March, 10-days, picking up, the stock price picks up. Look at how it’s narrowing here. It’s narrowing in trading range and then finally we’re here. So I am looking at this yesterday and I see that the 10-day is starting to get back, boom, above the 20-day. And at the same time if it is just going above the 20-day but the price isn’t doing anything, well, big deal. Maybe a big fund is buying or maybe a big fund is selling but there is no real concerted action because one thing is for sure, when you’ve got a stock that trades at 10 million, 12 million, 14 million there’s plenty of shares to buy so that’s not your problem. When you see a stock, though, start to move higher, and then you are also seeing volume start to tick higher you’ve got green skyscrapers here. You’ve got green volume bars and they are green because this is moving higher. So we like to see these big old skyscrapers. And so you see that you see the 10-day moving average moving above the 20 and so this is now a stock that is working.
So what did we do? I suggested to my members that they take some profits. They could take it all, you could take some and raise your stop to at least break even or lock in some kind of profit. Take half, I think we were up 12 or 13 percent, maybe more, but let’s say 12 percent for mental math sake. So take half off the table, move your stop on the remaining half to break even. You have locked in a total of 6 percent profit on the whole trade, so that’s what you could do. I just raised my stop a bit and I am letting the stock run. The way this is, and it’s the volatility squeeze that is dispositive to me because this stock is trading in such a narrow range, this is the type of pop here that could run a while. So definitely watch this stock tomorrow. A 16 percent move, that’s a pretty good chunk of change. But because of how this thing has traded for a while, and certainly the way it has run before, another 15 percent is not beyond the realm of reason.
Now, AMC ( NYSE: AMC ); we had some of our members say thanks for the trade yesterday. I rotated out of GameStop ( NYSE: GME ) and put it into AMC ( NYSE: AMC ). That’s kind of a good trade. That can really work because you look at the volume here, yet again, the 10-day moving average is above the 20 day and accelerating. So we’ve got these big green skyscrapers here. Five of them, maybe a little bit of one here. And so we have got buying coming into this. It is definitely a breakout so if you are buying this tomorrow you need to have some kind of risk management, maybe put a stop a little bit below $15.00, something like that. If you say, well, I will just put a stop down here. Well, for crying out loud, you are giving up almost 30 percent. That’s like, shall we say, that’s not a well-reasoned stop. So trade accordingly, but I think this stock has more upside. Again, use that to protect your risk in case good old Dan is wrong.