Support.com, other new memes stocks dip, pausing monster rally

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A trader works in the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York, United States, August 5, 2021. REUTERS / Andrew Kelly

Aug.31 (Reuters) – A group of so-called memes stocks were mostly down on Tuesday after dramatic rallies in their stocks in recent days suggested retail investors are still keen to bet on popular companies in forums in line.

Shares of software firm Support.com (SPRT.O) have jumped 313% in the six trading sessions through Monday and are up more than 1,400% since the start of the year. They were down 11.3% on Tuesday afternoon.

Digital marketing firm Vinco Ventures (BBIG.O), up 114% since Thursday, rose 0.3% on Tuesday. E-commerce platform Aterian Inc (ATER.O) fell 12.4% after gaining 60% in the last two trading days.

The recent moves were another sign that the wild rides associated with memes stocks may be a feature of the markets for some time to come. For eight months now, Wall Street has seen mind-blowing rallies of GameStop stocks and other preferred stocks by individual investors meeting on forums such as Reddit’s WallStreetBets.

Another sign of the potential persistence of the phenomenon came on Monday, when shares of Paypal (PYPL.O) surged after a report that it was exploring ways to allow U.S. clients to trade individual stocks on its platform. Read more

On Tuesday, the Wall Street Journal reported that Fidelity Investments planned to hire another 9,000 employees this year due to strong demand for stock trading and other personal investment services.

“Retail and dynamics are now a relevant facet of everyday business,” said Ihor Dusaniwsky, Managing Director of S3 Partners. “It is moving prices and institutional investors are taking notice.”

Options trading likely exacerbates the movements of certain stocks. Options volume for Vinco Ventures stood at 259,000 contracts early late Tuesday afternoon, making it the sixth most active stock name in the overall options market, data shows by Trade Alert.

AMC Entertainment Corp, which increased with GameStop in January and has seen subsequent rallies in recent months, was the third most active, with 406,000 contracts. AMC shares were up 7.8% for the last time.

Some of the even more recent stocks also have unusually high short-term interest rates, making them targets for investors looking to impose a short squeeze. This can cause stock prices to rise sharply, as bearish investors are forced to unwind bets against a stock.

Short interest on Support.com stocks, for example, was recently around 60%, while Vinco’s short interest was 20%, according to data from S3.

The massive volumes of some stocks are proof that the bulk of the gains came from bullish investors accumulating rather than bears closing positions, Dusaniwsky said. The trade volume for Support.com over the past three sessions, for example, was 115 million shares, or roughly 6.6 times the 50-day moving average.

This month, Support.com said a shareholder vote to merge with bitcoin miner Greenidge Generation Holdings is slated for September 10. Support.com announced that it will become a wholly-owned subsidiary of the bitcoin miner in March.

Many market participants believe that the same equity craze is unlikely to survive if the bull market ends whenever the US Federal Reserve unwinds the easy monetary policies that helped the S&P 500 double from its lows. March 2020.

“If ever that was a sign that there is too much unused money in people’s hands, it is gambling in stock,” said David Trainer, chief investment officer of a New Constructs investment research. “As soon as the super loose money starts to wane, I think you’ll see people become a lot more rational.

Reporting by Sinead Carew, Medha Singh and Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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