Is the Meme-Stock Moonshot Back?
GameStop and AMC Entertainment, icons of 2021’s meme-stock frenzy, are currently witnessing unusual trading volumes. However, the resurgence of the meme craze seems different this time around. While the hype is back, it may not have the same impact as before for several reasons:
- Daily inflows are smaller compared to 2021, indicating decreased interest.
- Volume in meme leaders like GME and AMC is only about 20% of what it was previously.
- Increased number of shares being traded in meme stock companies can reduce the likelihood of a short squeeze.
Decreased Daily Inflows
One of the reasons why the meme-stock frenzy may not have the same intensity as in 2021 is the decrease in daily inflows. The amount of money flowing into meme stocks on a daily basis is not as significant as it was during the peak of the craze. This suggests that the level of interest and excitement among investors has waned, potentially limiting the potential for significant price surges.
Volume Comparison
- The current trading volume in meme stocks like GameStop and AMC is considerably lower than what was observed during the peak of the meme-stock frenzy in 2021.
- Volume is a key indicator of market activity and investor interest. The fact that the volume is only around 20% of previous levels indicates a potential lack of widespread participation and excitement in meme stocks.
Increased Supply of Shares
Another factor that could be dampening the impact of the meme-stock moonshot is the increased supply of shares in meme stock companies. When there are more shares available for trading, it can dilute the impact of any buying or selling activity on the stock price. This increased supply may be making it harder for meme stocks to experience the rapid and dramatic price movements that characterized the 2021 frenzy.
Potential Short Squeeze Limitations
- The increased number of shares available for trading in meme stock companies can also lessen the chances of a short squeeze.
- A short squeeze occurs when investors who have shorted a stock are forced to buy shares to cover their positions, driving the stock price higher. However, with more shares available, short sellers may have more flexibility to cover their positions without causing a significant spike in the stock price.
Conclusion
While the resurgence of the meme-stock craze has garnered attention, the current landscape may not mirror the frenzied activity witnessed in 2021. Factors such as reduced daily inflows, lower trading volumes, and increased supply of shares in meme stock companies may be tempering the potential for another moonshot. Retail traders and investors will need to closely monitor these dynamics to assess the sustainability and impact of the meme-stock resurgence.
Hot Take: Analyzing the Current Meme-Stock Climate
As you delve into the realm of meme stocks, it’s crucial to recognize the nuances and shifts in the current market environment. The return of the meme-stock craze may not deliver the same fervor and volatility seen in 2021. Keep a watchful eye on daily inflows, trading volumes, and the supply of shares to gauge the true potential of the meme-stock moonshot.
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