Meme Stocks AMC, GameStop Are on the Rise as Market Volatility Skyrockets – Should You Invest?

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Is it the return of a full-fledged meme mania, or just the result of retail investors “buying the dip” on AMC and GameStop stocks? Investors and analysts aren’t sure, but trading of the two stocks was halted “several times during the day for volatility,” on Thursday, May 12, 2022, according to Yahoo Finance.

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AMC closed up 8% on Thursday, trading at $11.20 per share. It’s important to note that this is still close to the bottom, and a far cry from its 52-week high of $72.62. GameStop, meanwhile, closed at $89.57 after reaching a high of $108.05 Thursday morning.

It’s worth noting that neither company had significant announcements on Thursday and, in fact, AMC stock was reeling earlier in the week after a lackluster earnings call on Monday that revealed a first-quarter loss that was “wider than expected,” MarketWatch.com reported. However, the company did report revenue increases that exceeded forecasts. Overall, investors run bearish to neutral on the stock, MarketWatch.com reported, saying that it is still over-valued.

Meanwhile, it remains to be seen what will happen following GameStop’s earnings report next month. “We are now in a bear market where rallies are more akin to a ‘dead-cat bounce’,” Anthony Denier of trading platform Webull told U.S. News & World Report. “Finding the bottom is often tried, and very rarely achieved and as a result, retail investors are feeling the fatigue of catching the falling knife.”

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Several news outlets, including U.S. News & World Report, suggested that the rapid rise of AMC and GameStop on Thursday may not have been the work of retail investors but, instead, a direct result of institutional investors putting a “short squeeze” on the stocks. Investors who “shorted” the stocks — that is, sold borrowed shares in hopes of buying them back at a lower price — had to buy the stock back to cover their losses. The buying frenzy then drove the stock price even higher.

But there’s also the possibility that retail traders pushed the stocks higher with purchases while “buying the dip.” Both stocks, along with a handful of others that included Bed Bath & Beyond and Beyond Meat, dipped in the past week, along with the market as a whole.

“There are plenty of customers out there who continue to look for places to buy dips using very aggressive products to do so. That’s why with AMC and GME, when there’s a little kindling out there, the fire gets lit,” Steve Sosnick, chief strategist at Interactive Brokers told U.S News & World Report.

The New York Times reported on May 12, 2022, that the S&P 500 is “inching closer to bear market territory.” CNBC’s Ron Insana wrote Thursday that “this is a bear market that anyone could have seen coming.”

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If you are looking to buy and hold in this market, it’s always better to look at a company’s fundamentals rather than follow the trends of meme stocks with an uncertain future.

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