Important points
- Pandemic-era meme stocks GameStop and AMC Entertainment both soared more than 70% on Monday, potentially triggering a short squeeze as investors rush to cover short positions.
- Monday's rally in meme stocks cost GameStop short sellers nearly $1 billion, according to data from S3 Partners.
- GameStop stock could encounter selling near its resistance zone from previous price movements between $37.50 and $63.50.
- We can see that AMC Entertainment's stock price is at the confluence of resistance around $13 from its 50-day moving average and a horizontal line that traces back to the March 2020 lows.
Pandemic-era meme stocks GameStop (GME) and AMC Entertainment (AMC) both surged more than 70% on Monday, hitting multi-month highs as social media-powered meme stocks dominated Wall Street in January 2021. It evoked memories of enthusiasm.
During that crazy month, the stock price of brick-and-mortar video game retailer GameStop soared 17 times, the stock price of movie theater chain operator AMC soared six times, and I held short positions in both stocks. This led to huge losses for hedge funds.
Online meme protagonist Roaring Kitty's first post on X in three years reportedly sparked Monday's stock rally and cost GameStop short sellers nearly $1 billion in losses. According to the data from S3 Partners cited: CNBC. This could fuel further gains in the coming days due to a short squeeze as investors rush to cover their positions, putting further upward pressure on prices.
Below, we take a closer look at the charts of both meme stocks and point out important levels to watch in the upcoming trading session.
game stop
Looking at the weekly chart, GameStop stock has remained entrenched in a downward channel since reaching the height of the social media-driven meme rally in January 2021. In recent weeks, the stock has been rising toward the upper trendline in a pattern that roughly matches the 50-day moving average, indicating growing bullish sentiment. Additionally, Monday's 74% gap rise opens the door to follow-through buying, considering this move occurred on above-average volume and price closed above the closely watched 200-day moving average. .
Looking ahead, investors should focus on the area between $37.50 and $63.50. This area is an area on the chart where price may encounter selling pressure from a resistance zone due to previous price movements. A break above this level could retest the stock's all-time high (ATH) of $120.75.
After rising 74% during regular trading on Monday, the stock rose another 21% to $36.90 in after-hours trading.
AMC Entertainment
Also, looking at the weekly chart, AMC stock has traded mostly within a descending channel since rising above $390 in June 2021, aside from a bull trap breakout during the summer months of last year. has been done. Interestingly, since then, the stock's trading volume has increased significantly while the stock continues to hit record lows. Recently, rumors of an upcoming meme rally have gathered momentum on social media platforms, so buyers may be piling into the stock near the channel's lower trendline.
Investors should keep an eye on the $13 level in the coming days. This level is an area on the chart where traders can take profits near the confluence of resistance from the 50-day moving average and a horizontal line dating back to the pandemic-era lows of March 2020.
After rising 78% in regular trading, AMC stock rose another 24% to $6.42 in extended trading Monday.
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As of the date this article was written, the author did not own any of the securities mentioned above.