$AMC Entertainment(AMC)$ AMC Entertainment is back in the news again, this time with rumors swirling that Amazon may be interested in acquiring the movie theater chain. This news has caused the stock to jump by over 13%, leading to questions about whether it will trigger another short squeeze by AMC supporters or provide an opportunity for traders to short the stock. Let's take a closer look at the situation.
AMC intraday chart
The Amazon Acquisition Rumors
According to a report from Intersect News, Amazon has been in talks with AMC Entertainment about a potential acquisition. The report claims that Amazon sees the movie theater chain as a way to expand its entertainment offerings and boost its streaming service, Amazon Prime Video. However, it is reported that analysts believe an acquisition is highly unlikely due to the high cost of acquiring AMC, the struggling movie theater industry, and Amazon's own focus on streaming.
Short Squeeze Potential
The news of Amazon's potential interest in AMC has led some to speculate that another short squeeze may be on the horizon. Short squeezes occur when investors who have bet against a stock (by shorting it) are forced to buy shares in order to cover their losses, driving up the stock price. This happened with AMC in 2021 when a group of retail investors on Reddit banded together to drive up the stock price and squeeze out short sellers. Following the initial short squeeze, AMC stock have spiked up quite a few times but eventually fall back to earth over time.
However, it's important to note that the situation with AMC is very different now than it was during the previous short squeeze. At that time, there was a large group of retail investors who were actively buying and holding AMC stock, leading to a dramatic increase in demand. Now, the stock's increase in value is largely due to speculation about a potential acquisition, rather than any concrete developments. This means that the short squeeze potential may be limited. However we cannot be sure that this news is the start of another deliberate attempt to create another short squeeze.
Opportunities for Traders to Short the Gap Up
For traders who are looking to short AMC stock, the news of Amazon's potential interest could provide an opportunity. If the acquisition does not happen, it's possible that the stock will return to its previous levels, providing a chance to make a profit by betting against it. However, traders should be aware of the risks involved in shorting any stock, including the potential for losses if the stock price continues to rise. Instead of shorting the stock directly, it will be advisable to buy put options to lower the amount one is risking.
The Bigger Picture
It's also important to consider the broader context of the movie theater industry when evaluating the potential for AMC stock. While the news of Amazon's potential interest may have caused a temporary boost in the stock price, the industry is still facing significant challenges due to the rise of streaming services. The cinema operator has suffered losses for many consecutive quarters. Box office revenue remains well below pre pandemic levels, as consumers continue to opt for streaming content at home. Other cinema chains have also seen their prices drop. It's unclear how long it will take for the industry to fully recover, and this uncertainty should be factored into any investment decisions
Conclusion
In conclusion, the news of Amazon's potential interest in AMC Entertainment has led to a surge in the stock price and raised questions about short squeeze potential and trading opportunities. However, investors and traders should carefully evaluate the likelihood of an acquisition and consider the broader challenges facing the movie theater industry before making any investment decisions.
Do you dare to short AMC this time? Let’s vote.
@TigerStars @MillionaireTiger @CaptainTiger @Daily_Discussion
Comments