Why GameStop Stock Soared 20% Tuesday

Motley Fool2021-05-26

What happened

Shares of GameStop(NYSE:GME)have been relatively calm over the past month. Entering the trading day Tuesday, shares were up about 6.5% over the last 30 days. And volatility had also been decreasing, with its 30-day average daily volume dropping 60% in that time. But Tuesday afternoon, the stock looked more like it did in late January, when it became a favorite of retail traders in online forums looking to create ashort squeeze. As of 3:30 p.m. EDT, GameStop shares were up more than 15%, just off recent highs of the day.

So what

This afternoon's spike happened in concert with other former meme stocks includingAMC Entertainment(NYSE:AMC)andKoss(NASDAQ:KOSS), both of which also spiked double digits. There isn't company-specific news on these names Tuesday. Though the short interest on GameStop has plummeted since the frenzy earlier this year, another short squeeze could be possible.

Now what

GameStop sill had almost 12 million shares sold short as of the end of April; that represents about 18% of outstanding shares. Another concerted effort on the part of the online retail trading crowd could conceivably create another short squeeze similar to January's, but it wouldn't have nearly the staying power. Shares held short have declined by about 80% since then.

Regardless of whether that may be occurring again, longer-term investors should have learned a lesson from the exponential January rise and subsequent crash of GameStop shares. Ultimately, the underlying business will determine whether its valuation can hold, not short-term traders.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • Dem0171c
    2021-05-27
    Dem0171c
    Fools knows nothing. 
  • Engengcheng
    2021-05-27
    Engengcheng
    good
  • Daveb
    2021-05-26
    Daveb
    ????????can someone please delete these fools.....
  • Bulbul
    2021-05-26
    Bulbul
    Fool so quickly to say it’s not going to hold. Shorts have been down 80%, yeah right! What about the additional shorts on the dark pool?? When the squeeze is squooze, we’ll see who laughs in the end. Diamond hands, i can hodl longer than they can stay in business. Come on, apes!
    • Daveb: 
      This is the WAY... ????????
  • SK118
    2021-05-26
    SK118
    Up Up Up.... Long waiting 
  • Aragosta
    2021-05-26
    Aragosta
    For a better understand of the stock, refrainfrom looking into Main stream media, as they are mostly own by the people who had shorted the stocks and is continuing to do so even till now. Everything will be revealed after the shares are counted in June. So don’t be the fool who sold the stocks after listening to another fool (Motley). 
    • Daveb: 
      Well said my friend... to losten to any mainstream reports on stocks is foolish.. especially fool.com....???
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