Meme stock craze is back and creates volatile behaviour again!

Shares of GameStop and AMC surged by approximately 60% in premarket trading on Tuesday 14th May 2024, signalling a potential continuation of gains as the meme stock crazes makes an unwelcome comeback.

Shares of the video game retailer GameStop surged 59% higher in late trade while the movie theatre chain AMC’s shares rose over 64%. Other so-called ‘meme stocks’ were also set to open significantly higher on Tuesday.

GameStop’s shares soared more than 100% and experienced multiple halts due to volatility after Roaring Kitty made a comeback on X. His tweet, a simple image of a man leaning forward in a chair, marked his first post in three years and was enough to spur the ‘wild traders’ into blind action.

Although GME had already begun rallying before, the surge yesterday was extreme and reminiscent of the original meme stock frenzy involving WallStreetBets and Melvin Capital. Ultimately, it closed up 74%. With GME’s short interest at 24% prior to the surge, it’s likely that a significant portion of the movement was due to short-covering, as well as some hedge funds having calls on their shorts.

Trend-following and momentum strategies may have contributed to the rise. Retail investors appear to be growing more bullish and willing to take on greater risks. The surge seems to lack a fundamental basis, as GME’s last earnings report was notably very poor. N

However, not all meme stock involvement is blindly speculative.

But it is just a game to some!

What is a meme stock?

A meme stock refers to the shares of a company that have gained viral popularity due to heightened social following. This social ‘following’ is usually due to activity online, particularly on social media platforms

Leave a Reply

Your email address will not be published. Required fields are marked *