Some time back I was writing posts regarding the Redditt groups and the push by these groups into both momentum trades and into highly shorted stocks. You are probably familiar with this group action, which recently has been tagged as “meme stock trading”.
I’m pretty sure the term “meme stock” came from the somewhat tongue-in-cheek name applied to a cryptocurrency known as Dogecoin – taken from one of the original memes using a dog as the background model.
Truthfully, the older I get, the less able I am to keep up with all of these social media based themes and trends. Whatever the case, I thought I’d look at a few of these trades today – just to see if there are some technical trading opportunities within this “buy beaten stocks and flip them on the momentum” trading strategy. Need I tell you that this is a mugs game that is NOT suitable for anyone outside of a gambling/short termed trading mentality? If so – then I am telling you now. This is a game of the gambler – not an investor.
As a bit of history, Seeking alpha noted: “The meme trade began with GameStop (GME) back in January was partly a strategy (short squeeze), partly a gamble and partly a middle finger to Wall Street (little guy vs. the suits).”
Meme trades work like this: Retail “investors” throw money (often COVID stimi- cheques) into one stock without caring about risk management or diversification – aided by access to commission-free trading. They are searching for a momentum name or a short squeeze candidate.
Examples of the short squeeze trade include:
Gamestop (GME) as noted above
Hertz (HTZ) being bid up during bankruptcy last summer
Kodak (KODK) same story
Examples of the momentum trade include:
Tesla (TSLA) up until this February, where it ended up being worth more than every carmaker on earth combined despite a fraction of their sales and profits
Bitcoin (BTC), Dogecoin (DOGE) etc.
What’s new in the world of meme trades?
Current trades that are apparently getting the attention of the meme crowd include AMC Entertainment (AMC), Blackberry (BB), World Wresting Association (WWE), Clean Energy (CLNE), GEO Group (GEO), Clover Health (CLOV) and even Wendys (WEN)
For kicks n giggles, lets go through a few of the charts to see if there are opportunities for more upside This is a PG-rated blog, suitable only for adults willing to take on high risk trades only.
What’s not to like about huge dudes smashing chairs over each others heads in a confined ring? This stock displays a classic bottom base breakout- the $60 neckline was recently broken. Off WWE go!
Remember the commercials with Dave Thomas, founder of Wendy’s burgers? You just liked the guy! If WEN breaks out through the $24 lid its been facing for quite some time (2019), I’d like the stock, too!
GEO is a real estate trust in the US. I’d trust this trust if the downtrend were more succinctly broken and a base established. It is trying to do so- Worth watching for those looking for a reversal trade.
If meme trading is the new short termed trading strategy, then timing is everything. You can own a meme trade until the last trader or “greatest fool” has bought…
One final thought: With the meme trade spreading to new sectors and industries, will stock fundamentals still hold water?
Final, final thought….Did they ever?