[imagesource: r/WallStreetBets]
If enough people come together, as they do on the r/WallStreetBets subreddit, they can cause serious movement in the stock market.
Back in January, GameStop’s stock soared through the roof, which introduced the world to the power of Reddit’s investment army, and the battle continues.
Yesterday, individual investors redoubled their efforts to pump up the prices of Wall Street’s most heavily shorted companies, and they were largely successful, reports Forbes:
…shares of [movie theatre chain] AMC spiked more than 100% Wednesday and have surged a staggering 570% over the past month…
Meanwhile, struggling brick-and-mortar retailer Bed Bath & Beyond is soaring nearly 51% Wednesday as traders on Reddit’s r/WallStreetBets discussion board tout that the stock’s short interest has climbed to nearly twice the level of fellow meme-stock GameStop, which led the January rally and is up about 60% in the past month.
You may think BlackBerry is dead and buried, but shares in the company rose 15% yesterday, and 55% over the past month.
The share price of Beyond Meat and Koss Corporation have also risen around 40% over the past few weeks, as of the market closing yesterday.
Here’s a look at AMC’s share price, as it traded throughout yesterday:
The same, but for Bed Bath & Beyond:
Those are staggering rises, and I’m sure there are some people who have made very good money betting on those short-term changes.
However, if we can learn one thing from what happened earlier this year, it’s that you can get stung very quickly.
Experts have warned that the saga pinning institutional investors against Reddit traders could end badly:
The recent meme stock rise follows a similar surge in January, when activist investors perched on Reddit’s r/WallStreetBets board pumped struggling firms like GameStop and BlackBerry in a bid to hurt short-sellers…
Meme stocks have been incredibly volatile this year, with most crashing in late January once institutional investors piled out of their short bets after weeks of meteoric gains.
Thus far, only AMC, which has also benefitted from businesses reopening, has recouped those losses.
CNBC also sounds a cautionary vote for potential investors:
Understandably, investors may be so caught up in the gains that they forget to remember the potential for losses.
If you’re looking to dabble in meme stock names, it’s important to remember you’re really playing a game like musical chairs, and behave accordingly, according to Dan Egan, vice president of behavioral finance and investing at Betterment.
“Half the game is figuring out how to sell before it crashes,” Egan said.
He advises that you have an exit strategy, with prices set for when you will sell.
That can be done automatically on many platforms, so that you don’t run the risk of hanging in there in the hopes of the price rising (or sinking) further.
You can read more on that here.
Wherever, and however, you’re dabbling, just make sure you have a plan.
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