Meme Stock Graveyard

Retail traders can move stocks up temporarily, but they can't fight the forces of fundamentals weighing down on their favorite names.  Meme stocks are a collection of some of the worst stocks in the market, defunct businesses and or pipe dream stocks that have become massively overvalued due to nonstop pumps from retail and the inflow of dumb money.  

History doesn't repeat, but it does rhyme.  GME, AMC, CLOV, and SPCE are good charts to review and study what happens to meme stocks at the start of the feeding frenzy, and what happens afterwards when the stock gets bogged down by a boatload of stuck bagholders clinging to hopes of a revival to past highs.  GME is the most seasoned of the post peak meme stock plays.  After its crazy run up in January, the lack of new retail money, high prices, and weak fundamentals bear their weight on the stock price.  AMC is entering this phase of the post peak meme stock cycle, as it is now down over 50% from the peak, but still at ridiculous price levels.  There will be occasional spikes higher, echo pumps, along the way, but expect it to go down gradually over time as the bagholder hopes slowly fade away.  Similar story for CLOV and SPCE. 

I bring up the meme stocks because we've got a new one on the horizon, HOOD.  HOOD is a little bit of a special case in the meme stock world, because its a fresh IPO, and the free float is a small percentage of the overall shares outstanding.  Also, unlike GME, AMC, CLOV and SPCE, the fundamentals are not bad.  I would argue that its probably the highest quality meme stock out there, and probably the least overvalued. 

 

I am not saying that HOOD is a good long term stock to own, but I can definitely picture it going much higher due to the small float and the relatively decent fundamentals.  The fact that most of these retail newbies who are piling into the meme stocks have brokerage accounts there probably gives it more staying power and long term popularity.  It is probably the best meme stock "story" of the group.  

HOOD has instantly become a daytrader favorite, and that in itself probably will give it a premium multiple compared to other retail brokers.  It is probably no coincidence that the other main meme stock, AMC, has done poorly in the past few days as HOOD has skyrocketed.  HOOD is taking up all the retail buying power, taking away the fuel that  AMC constantly needs in order to keep the stock price up, which is difficult at these inflated levels.  

The S&P 500 has gone nowhere for the past several days.  A boring market.  Nothing going on, although I still expect a sudden pullback later this month.  Complacency is building up slowly, yesterday was the first day post Monday, July 19 dip that the put/call ratios got to low enough levels that are a warning sign.  A few more days of these low put/call ratios and sideways price action will set this market up for a quick drop.  That is the hope, at least.  I am not making any bearish bets.  Just hoping for a dip to buy.