Hey 5-Star Trader,
Gamestop (GME) and AMC were formally floundering tickers but were revived last year thanks to a huge influx of retail traders buying short squeezes. Since then the popularity cooled somewhat, but once again these stocks showed a little bit of rallying earlier this week.
I think this can be explained because right now GME and AMC are short squeeze candidates due to high short interest. These types of tickers usually experience high volume buying when breaking above recent highs. This is because when traders or funds come in and short a stock they usually have their stops above recent highs. If the stock approaches recent highs, these “shorts” know they are wrong and have to buy to cover and exit the position. This causes volume buying to increase.
Consequently, when a ticker makes recent highs (not a new high, since we are still well below those levels), it also grabs the attention of the media and retail traders. This also results in an influx of buyers.
So, it is usually a combination of short-covering and retail buying that causes upward buying pressure. Additionally, GME historically trades higher pre-earnings and we are within that window. The likelihood of GME continuing higher prior to the upcoming report is strong.
Certainly, GME and AMC have made a name in the market and it will be interesting to see how these names continue to play out in this short-interest environment.
Want to learn more about capitalizing on a short squeeze? Hedge funds are always shorting stocks, and unlucky for them – but lucky for us – many of these highly shorted names have turned out to be huge winners, providing fantastic buy opportunities for traders. In my “Short Interest Secrets” course I show how to identify explosive setups before they happen.