Meme stocks take eerily similar journeys leaving retail traders to wonder why and who

Thursday’s blast off put AMC on track for a sixth straight day of gains, its first in two years, but it also set off speculation of more short squeezes by retail traders who have argued all year that both companies are being undervalued and aggressively shorted by hedge funds. 

Both stocks experienced a rocky day with AMC pulling back after popping just over 4% in early trading. GameStop also responded optimistically to the opening bell but peaked at its own nearly 4% gain. 

Both hit their highs and began to pull back within 10 minutes of one another and then followed similarly turbulent paths lower on the day, patterns not reflected in broader markets.

“Just looking at the chart, they look a lot alike,” mused Dave Lauer, data scientist and CEO of Urvin AI. “If you watch the trading, these things trade very differently than other equities. You just see a ton of small trades. Constant tiny trades.”

But while Lauer’s analysis explained why both stocks fought higher early and attempted to maintain those gains, the gravitational pull on both stocks was less obvious and led to familiar hypothesizing on social media.

“New [hedge fund] strategy is becoming so clear,” Reddit user Stonkinator3000 posted to GamesStop board r/Superstonk. “Let the movie stock run, hold GME down, hope GME holders abandon ship partially or fully for the stock that’s ‘squeezing’ now.” 

Other users responded to the post with agreement, positing that hedge funds and other institutional traders were applying identical shorting approaches to both stocks, furthering their thesis that professional short sellers are manipulating the market.

And Stonkinator3000 also encapsulated the response many retail investors have to that strategy, posting “Good luck with that fuckers, you’re going to have to pry my GME shares from my cold, dead hands.”

Lauer agreed that there might be something to the theory that GameStop and AMC were dealing with similar market forces on Friday.

“It would not surprise me if institutions think GameStop and AMC are overvalued,” he said. “But then you have this horde of diamond-handed retail traders who will not back down. That’s what this looks like.”

Playing further into that narrative are the recent moves by both companies to capitalize on their meme popularity by completing large at-the-market equity offerings, providing them with much needed fresh capital to pay down problematic debt loads, and both companies saw their stocks surge on the announcement that they had issued new shares.

Both stocks were showing heightened short volumes going into Friday trading, lending credence to retail concerns that shorts remain just as committed as the diamond-handed “HODLers” of GameStop and AMC.

For market experts like Lauer, who has engaged with the retail community and come away impressed, the dynamic is far from over.

“They absolutely see this as a value trade,” he said of retail investors. “They’ve done their homework. They see AMC as a reopening play and GameStop as management turnaround story. I don’t think you can look at the level of research they’ve done and dismiss them because it’s not fair and it’s not giving them the credit.”