In 2021, GameStop enjoyed a spectacular rally in three phases. The first January rally sent the stock to around $350 for a few days ($483 as the intraday high). In March, Reddit’s WallStreetBets lifted GME stock to over $250. And in June, the stock rallied briefly to around $300.
The subgroup is losing buying momentum. Trading volume is thinning out on GME stock. Similarly, AMC Entertainment (AMC) fought to hold the $60+ level throughout June. The united buying is ending. Markets will need to value AMC based on its future earnings potential.
AMC and GME will need to pivot the business. It can no longer bleed more money. Should those firms post weak quarterly results again, selling pressure will accelerate.
ContextLogic (WISH) and ContextLogic (CLOV) were short-selling stars in June. Once the buying frenzy ended, the subgroup members had no choice but to sell before losing more money. CLOV and WISH must also post strong results. Chances are low that the firms will meet the market’s expectations. The short float is 37% on CLOV stock, so bears are betting that fundamentals are deteriorating.
Reddit’s WSB subgroup is likely spreading their buying among too many stocks. They must pick one and stick with it. Otherwise, all of the meme stocks they picked in 2021 will fall hard.
