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Sunday, April 11, 2021
Stocks & Shares

GameStop shares back from three-week rout

GameStop

According to data from Bloomberg, GameStop spent nearly seven sessions trading above Wednesday’s closing price of $91.71

Shares of GameStop soared back from a three-week rout, rising four times, as high as the closing level Tuesday. Over 77 million shares were traded Wednesday, including 30 million after hours in New York. The late trading went off at an average price of nearly $135 a share.

According to data compiled by Bloomberg, GameStop spent nearly seven sessions trading above Wednesday’s closing price of $91.71, from Jan. 26 through Feb. 3. During that period, 364 million shares changed hands at a volume-weighted average price of $185.39. At $200 a share in after-hours trading, that’s a gain of 8% from such levels.

As Yogi Berra said, ‘It’s deja vu all over again,’ said Adam Phillips, director of portfolio strategy at EP Wealth Advisors. Latecomers to last month’s surge might be getting a new lease on life here, but there’s no telling how long this latest rally will last.

The meme-stock mania that peaked in late January roared back Wednesday afternoon. Shares of GameStop more than doubled in the cash session, as other retail favourites such as Koss Corp. and Express Inc. climbed more than 40%. Demand was so high that Reddit.com would not load.

GameStop is back in the game, said Sam Stovall, Chief Investment Strategist at CFRA Research. It almost seems as if these investors are saying ‘maybe it’s safe to go back in the water.’

While the GameStop saga may have calmed in February, Wednesday’s revival suggests that the power of the stuck-at-home day trader is far from diminished. Retail traders now account for 23% of volume on the $33 trillion U.S. equities market, up from 20% last year, according to Bloomberg Intelligence.

Their influence was apparent in the rush for GameStop shares. Volume was more than 10 times that of the day before and more than five times the average over the past 12 months. The vast majority of the trades late in the day were “odd lots,” or orders for less than 100 shares, and many were for only a single share.

That could indicate a rush among retail traders for the stock, though it also could represent larger buyers breaking up their orders with computer algorithms.

This rally creates a really dangerous precedent — individual investors who levered up positions in GameStop and lost thousands of dollars last month may now say, ‘We need to buy it again’ and risk losing even more, said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. There’s this mentality of ‘No matter what, we know we’re right.’ This could end in tears.

That doesn’t mean the frenzy is going to end anytime soon though.

Right now, the memory that’s most fresh in people’s minds about this topic is that this could go on faster, longer and higher than people had ever seen before, Steve Sosnick, chief strategist at Interactive Brokers, said by phone. And the lesson speculators learned is, chase it until it hurts.

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