The S&P 500 finally bounced in a meaningful way on Wednesday, resulting in the best trading session since early February. As bad as things felt following five consecutive losses, Wednesday’s gain puts the index within 0.2% of yet another record close. Funny how that works.
But this shouldn’t surprise anyone. As I wrote Tuesday:
The market took the long route, but Tuesday’s small gain finally broke the five-session losing streak. And more than than just ending a losing streak, the decisive rebound off of 3,800 support looks a lot like capitulation. It was an ugly day, but fortunately it had a happy ending.
The index is in good shape and at this point, fresh highs are pretty much a foregone conclusion. But that’s not what I want to write about tonight. There are so many exciting things going on in the FAANG highfliers, TSLA, and Bitcoin. But just when everyone stopped talking about GME, it came roaring back with a 100% gain and it surged another 200% in the after-hours session.
Can you believe someone paid nearly $200 for GME when the stock was selling for $48 just a couple of hours earlier??? As Forest Gump famously said, “Stupid is as stupid does.”
Haven’t we already seen this movie? But people never learn and this was entirely predictable. Back in early February, I wrote:
As for what comes next, GME will be insanely volatile for weeks and even months. That means 50% and 100% moves in both directions. But at this point, a 50% bounce only gets us back to $75. Maybe we get back to $100 or even $125, but waiting for anything higher is just wishful thinking.
For weeks late-to-the-party GME buyers were praying for a chance to get out and recover some of their foolish losses. Well, thank your lucky stars because here is your chance.
Unfortunately for many, those feelings of regret will quickly be overcome by a second wave of greed and they will start dreaming of that $1k payday again.
There is nothing wrong with riding this wave higher as a quick trade to make a buck. But anyone thinking this is going to the “moon” has no idea how the market works.
Keep holding for higher prices but use a trailing stop and get out when this turns south because this stock won’t get back above $100 after this dead cat bounce fails.
“Fool me twice, shame on me.”
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Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.