Think 2020 was intense for stock traders? Welcome to 2021…
January started out with a bang. GameStop Corp. (NYSE: GME) stock exploded higher, gaining more than 1,600%. At the end of December, it traded under $19 per share. It closed the last day of January at $325 and even peaked up over $500 a few days prior.
During the same time, the broader markets ended January near flat. The Dow was down over 600 points on the month, about 2%. The S&P 500 and the Nasdaq Composite were each up about 1%.
But February has, so far, brought a sense of normalcy back to the stock market.
GME is back under $100 and falling, losing more than 50% of its value today. Other stocks that saw heavy buying from the Reddit group r/WallStreetBets are fading quickly as well. AMC Entertainment Holdings, Inc. (NYSE: AMC) dropped more than 50% too.
Meanwhile, the broader markets are seeing a strong rally. The Dow rose as much as 600 points in morning trading. At writing the S&P 500 and Nasdaq Composite are both up closer to 1.5% each.
Veteran penny stock trader Timothy Sykes has seen short squeezes like GME and AMC before.
He warned people that buying, holding, and hoping these stocks will continue higher isn’t likely to end well.
In a tweet Tuesday morning, he indicated that he and at least one of the top traders who has been through his Trading Challenge have moved on to other opportunities in the market.
Sooooooo many people holding & hoping on their losing longs in $GME $AMC $KOSS it blows my mind, how in the hell are you not looking at far better price action in $INKW which has tripled in 2 days, I’ve locked in $2k+ but bigger props to @mono_trader who’s made $41,000 on it! pic.twitter.com/VJp6N6hFKd
— Timothy Sykes (@timothysykes) February 2, 2021
Hot plays come and go but massive spikes tend to all end the same way — collapsing nearly as fast they rise. At this point, GME has not proved to be an exception.
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