Ok, so last week I wrote a piece about market sentiment and used Tesla ($TSLA) and Bitcoin ($BTCUSD) as the poster children for where I thought market sentiment was. Well, I was wrong.
Enter, GameStop ($GME).
If you’re a trader like me then this story has been ongoing for the last few weeks and it’s probably getting annoying to hear about. Unless you’re long. If you’re short, you’re probably moving back in with your parents.
For those just tuning in, $GME shares have absolutely exploded in recent weeks, gaining 828% year-to-date (“YTD”) and 6,093% from the low last April. It’s trading at over $200 after hours and it’s old all-time-high in 2007 was around $64/share.
Here are the daily and monthly charts (as of today’s close) for reference:
So what’s the story? The answer is, insane. The first catalyst that I came across was Ryan Cohen, co-founder of Chewy.com ($CHWY) joining the $GME board in early January after taking a stake in the firm and urging the company to become the Amazon of video games back in November. Enter the infamous sub-Reddit, r/wallstreetbets. To add fuel to the fire, members of the 2M strong forum began spending their stimulus checks and life savings on $GME shares and call options.
They are quite committed and have turned this from a trade to a full on assault on Wall Street and the establishment media.
Here’s a screenshot from their page:
$GME also had an insane 140% short interest, which I didn’t even know was possible. Basically a bunch of hedge funds and investors were betting the stock would fall further. Oops…
Short interest is the number of shares that have been sold short but have not yet been covered or closed out. Short interest, which can be expressed as a number or percentage, is an indicator of market sentiment.
— Investopedia
So what happened to the shorts? The most covered casualty was Melvin Capital, a revered hedge fund started by former SAC Capital star, Gabriel Plonker. Their losses were so bad that Citadel and Point 72 (another hedge fund) invested several billion to ease the massive losses. See that story here.
The story was already insane. Today, it got even more insane. The stock opened at the lower end of yesterday’s range and it seemed like it was losing steam. That is until the billionaire SPAC-king, Chamath Palihapitiya decided to help turn the screws with an early morning tweet.
The stock then rallied another 87%, or $69 (nice) through the end of the day to a new all-time closing high of $148.
Cool story, right? Well, it wouldn’t be complete without, or more absurd, without Twitter’s favorite CEO chiming in. Following the market close, Elon Musk tweeted, “Gamestonk!!” Logically, the stock has rallied another 44% to $214/share.
That’s it. That’s the story. It actually doesn’t end with $GME. Many other highly-shorted stocks are now following suit — $AMC, $BBBY, $BB, etc. That’s where sentiment is. Buy shitty stocks with high short interest. Sorry, $TSLA and Bitcoin.
I am happy for everyone that made money in this meme stock. Protect those gains.
You were not wrong, just didn’t understand the power of the mob; the mob is fickle brother. Raiders today are no different than hedge funds of the 80’s and 90’s. We communicated or should I say coordinated via phone while today’s group is coordinating their attack via a newer communication channel - LTCM is the classic example. These Robinhood traders have become the thing they despise the most, but they are ok living with themselves because they are making money, for now. A company that should be zero will eventually go to zero. They will get board and leave for a new shinny toy and $GME will be where it should be. As fast as the tide came in is as fast as it will go out.