Four Hallmarks of a Mega-Meme Stock

You're receiving this email as part of your subscription to Trend Trader Daily. [Unsubscribe here](. Four Hallmarks of a Mega-Meme Stock By Lou Basenese Tuesday, August 17, 2021 In case you pulled a Rip Van Winkle recently, let me get you up to speed: A revolution is underway in retail investing. With spare time and plenty of stimulus money on their hands thanks to the pandemic, an army of everyday investors has taken Wall Street by storm. In short, they’re disrupting the “smart money” by sending seemingly left-for-dead stocks into the stratosphere. This appropriately dubbed “Meme-Stock Mania” has propelled the poster children of the movement, GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC), to dizzying heights, up more than 500%. Repeatedly. Not to mention, it’s helped catapult the valuation of Reddit — the social media platform responsible for spreading the word about these stocks — to $10 billion, up 67% since February, per [CNBC](. To a classically-trained fundamental analyst like myself, this makes no sense. But just because something in the markets makes no sense, that doesn’t mean we can’t profit from it! Let me explain… ADVERTISEMENT Write this Number Down: 0001139685 This code is the KEY to unlocking almost unbelievable investment gains. It's not an options symbol, bond, or any crypto. But 10-digit codes like this could potentially change your life. [Click here now to see how »]( >> Meme-Stock Analysis for Dummies As I’ve written before, GameStop and AMC are fundamentally flawed companies. They’re operating businesses that are destined for obsolescence, as video gaming and movie watching are increasingly moving online. Stocks of such companies shouldn’t be rallying. They should be cratering. But they're not. And although I’m a fundamental analyst by trade, first and foremost, I’m a student of the markets. Through that lens, the meme-stock movement is increasingly instructive — as long as we isolate the key factors behind each meteoric rise. In short, every major meme stock has boasted the same characteristics: - Meme Stock Hallmark #1: An extremely small float or number of shares outstanding. That means any incremental buying naturally drives the stock price much higher, as only a scarce number of shares are available to buy. - Meme Stock Hallmark #2: A sudden uptick in chatter on leading social networks for everyday investors. Whether it’s the Wallstreetbets channel on Reddit, StockTwits, or other loosely organized groups of everyday investors, it doesn’t matter. Every major meme stock move was precipitated by an increase in online chatter. Granted, the “smart money” might bemoan this practice, but they’ve been doing the same thing for decades at the expense of everyday investors. So it’s about time the tables are being turned. - Meme Stock Hallmark #3: Most popular with Millennials and Gen-Zers. With age comes wisdom, as well as less risk-taking. But when it comes to meme stocks, they’ve been universally loved by the younger generations and prone to FOMO (“fear of missing out”). This fuels runaway buying at the expense of rational investing. - Meme Stock Hallmark #4: Multiple hype-driven rallies, resulting in higher lows and way higher highs with each successive one. Pull up the charts for Gamestop or AMC and you’ll notice a distinct pattern. Massive run-ups in price, followed by sudden pullbacks and periods of consolidation, and then another rally which takes the stock to way higher highs. This happens a minimum of three times, if not endlessly. In other words, each wave of new buying brings in more and more buyers, thereby driving the stock to even higher levels. Don’t Bet Against Main Street The most important realization of all? This retail investing surge isn’t a passing fad. “They definitely have influence, and they’re not going away,” says Larry Tabb, head of market-structure research at Bloomberg Intelligence. He’s dead right! In fact, the data underscores the staying power of retail investors. Consider: - More new entrants: In the first half of this year, new brokerage accounts opened by individual investors topped 10 million, which roughly matches the total opened in all of 2020, according to JMP Securities. - More buying power: Individual investors accounted for 20% of total U.S. equities trading volume last year, nearly double the figure from a decade earlier. In 2021, the total share kept rising, clocking in at 24% recently. (click image to enlarge) The Anatomy of a (Mega)-Meme Stock Now, imagine what would happen if this massive army of retail traders turned their attention to companies that were fundamentally strong — but also had the characteristics of meme stocks? Well, I’m here to tell you: it’s happening. After all, it’s a natural progression. You need to be in the stock “game” first before you learn its fundamental laws. Considering that the demographic of meme-stock investors heavily skewed to the younger generations, they’re quickly wising up and migrating to higher quality companies with the same set-ups. Most notably, stocks with a small number of shares in the float and a lower valuation, thereby setting the stage and providing room for a massive run-up in price. If we take anything away from meme-stock mania, it’s what hockey legend Wayne Gretzky figured out long ago: We need to skate to where the puck (in this case, the retail trading army) is going, not where it’s been. So stop wasting your time trying to squeeze profits out of GameStop and AMC... Instead, spend your time identifying fundamentally strong stocks that also have all the hallmarks of a mega-meme stock! Ahead of the tape, [Lou Basenese] Lou Basenese [Terms & Privacy](| [Unsubscribe]( 301 S. Perimeter Park Dr. Suite 100 Nashville, Tennessee 37211 RISK NOTICE: All investing comes with risk. That includes the investments teased in this letter. You should never invest more than you can afford to lose. Please use this research for the purpose that it's intended — as research only. You should consult a professional financial advisor before ever taking a position in any securities you see herein. SECURITY HOLDING NOTICE: Although we are never compensated from any companies for coverage, you should be aware that Trend Trader Daily, its authors, its owners, and its employees may purchase, sell, or hold long or short positions in securities of the companies mentioned in this communication. While authors might actively transact in the securities mentioned, they will always have a net position that is consistent with the position set forth in our research reports, letters and updates. 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