AMC Entertainment Holdings, Inc. (AMC) shares fell sharply lower before recovering during Monday's session after Credit Suisse downgraded the stock from Outperform to Neutral and cut its price target in half from $4.00 to $2.00 per share. The new price target implies a 52% drop from Friday's closing price as COVID-19 cases rise across the United States.

Analyst Meghan Durkin assumes that the company will be successful in its move to exchange $2.3 billion of subordinate debt for a combination of new second-lien debt and common stock. While this could support the theater chain through March, Durkin sees more risk to AMC's business model if there's a slow recovery from COVID-19.

Earlier this month, the company announced that all of its approximately 600 theaters would be open by July 24, with 450 opening by July 15. The recent jump in COVID-19 cases across states like Texas and Florida, however, has cast some doubt on these plans. It's also unclear how enthusiastic consumers will be to return to theaters amid the ongoing COVID-19 outbreak.

Chart showing the share price performance of AMC Entertainment Holdings, Inc. (AMC)
TrendSpider

From a technical standpoint, AMC stock briefly dipped below $4.00 during Monday's session before regaining ground. The relative strength index (RSI) remains oversold with a reading of 39.30, but the moving average convergence divergence (MACD) remains in a bearish downtrend. These indicators suggest that the stock could see some reprieve before a move lower.

Traders should watch for consolidation near $4.00 before a potential move lower. In addition to strong support at $2.00 per share, traders could see support at key Fibonacci support levels of $4.04 and $3.27. If the stock breaks out from the 50-day moving average, traders could see a move toward the 200-day moving average at $6.53 per share.

The author holds no position in the stock(s) mentioned except through passively managed index funds.