Meme stocks are making a comeback.
After weeks of funneling money into cryptocurrencies, retail traders seem to have rediscovered so called "meme stocks," securities that increase in volume not because of the company's performance but because of hype on social media and online forums such as Reddit.
GameStop’s (NYSE:GME) stock surged 13% on Monday (May 17), its second double-digit rally in three days. At the same time, AMC Entertainment (NYSE:AMC) rose 7.5% higher, building on last week’s 36% jump. A basket of stocks caught up in January’s Reddit-fueled meme-stock frenzy rose 5.6% on Monday for its best performance since late March.
Similar to the earlier mania, the catalyst for the latest advances seems to have come from social media. The hashtag #SqueezeAMC is trending on Twitter (NYSE:TWTR). It’s an effort to recreate the heavy retail buying in January that forced investors out of bearish positions in GameStop, AMC and other stocks.
Participation by retail traders swelled to 24% of all U.S. stock market action during the first quarter of this year, according to data from Bloomberg Markets. Stocks retail investors favor soared, including a 1,600% rally in January by GameStop. But those bets turned sour in the second quarter, with some of the Reddit targets falling more than 50% in a matter of days.
At the same time, demand for cryptocurrencies surged, sending Bitcoin and other digital coins into rallies reminiscent of the meme-stock frenzy. That buying has started to show signs of cooling off.
