Revenge of the Meme Stocks

May 30, 2021 | Gamestop, AMC, and Blackberry all surge for huge swing trade

Weekly Newsletter - Week of 5.30.2021 

Revenge of the Meme Stocks 

Another wild week of trading for the self-titled ‘Meme Stocks’. If you recall, GameStop was the first of these stocks to soar, but it certainly hasn’t been the only stock trading at parabolic multiples. The biggest concern with these type of stocks is their soaring share prices have little, if anything, to do with their business model or any fundamental changes to the company. 

GameStop: 25.57% 
AMC: 116.23% 
BlackBerry: 18.89% 

Once again, these massive gains seem to be fueled by the Reddit community WallStreetBets (WSB). Although the ‘retail trader’ is still the clear minority in terms of account size, traders are actively using derivates and margin to magnify gains and amplify their ability to move stock prices quickly. All this coupled with the power of social media leads to a force to be reckoned with and we continue to see the impact of a coordinated effort to drive up the price of a handful of stocks. 

Cramer Weighs-In 

Also, this week, famed personality and legendary investor, Jim Cramer shined another spotlight on WSB and the meme stock sector further putting these stocks in the public eye. He applauded the efforts of WSB and mentioned other names highly susceptible to another coordinated effort. Cramer mentioned Beyond Meat and Virgin Galactic as two other possible stocks ripe with opportunity- each saw massive gains after his comments. 

Remember, underneath all the frothiness of these stocks is an inflated short interest ratio. As we recently discussed in one of our blogs, short-interest can be used to measure overall bearishness in a stock. High short-interest can indicate that institutions have made investments that assume a decrease in price is imminent. As hedge funds continue to short, there will continue to be wild swings in volatility as retail investor’s aim for a short-squeeze. 

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

Investors Anxiously Await Infrastructure Bill 

Investors continue to anxiously await any new details on the proposed Infrastructure Bill. Despite the consensus that upgrading infrastructure will add jobs and help grow the economy, divisiveness remains on how to complete the upgrade, what should be included, and what the price tag should be. With the debt levels continuing to swell to unprecedented levels, the Infrastructure bill will continue to drive immediate sentiment in the market. 

Rough Month for Crypto 

As we discussed in last week’s newsletter, energy consumption and China’s regulatory policy are just the latest headwinds working against Bitcoin and all of crypto- as of this writing, BTC is down 43% from highs. This drawdown is on pace to become the second largest decline in Bitcoin’s history. Despite the massive selloff we’ve been witnessing, blockchain analytics provided some interesting datapoints this week. It appears the recent selling has been driven by new Bitcoin investors who were panic selling. Many of the coins that were recently sold, were held by new investors trading Bitcoin for the first time. Conversely, institutions buying of Bitcoin surged this past month. A growing sign of the long-term confidence in crypto and its prospects. With one of the worst months on record for crypto now in the rear-view, we’ll be looking for signs of new cryptocurrency momentum as we head into June. 

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

Recent Watchlist Winners

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