More retail traders joined the Reddit crowd as their focussed on short-sellers in other asset classes, but they struggled to make the same impact
The Reddit online forum that fired up a global trading frenzy was in a more sober mood on Tuesday, with many retail investors urging others to “buy the dip” as their favourite stocks plunged.
An army of retail punters had sent shares in U.S. videogame chain GameStop and cinema operator AMC soaring in the past two weeks, causing billions of dollars of losses for Wall Street hedge funds which had made costly “short” bets that the share prices would fall.
But with GameStop halving in value on Tuesday, bringing its loss since Thursday’s peak to 75%, and AMC losing another 40%, the earlier euphoria was fizzling out, judging by posts on the popular Reddit forum WallStreetBets.
The squeeze on short-sellers in Reddit-favoured stocks upended Wall Street, forcing hedge funds such as Melvin Capital to post declines of more than 50%.
Short-sellers such as Andrew Left’s Citron Research have shifted their approach to focus only on long positions.
More retail traders joined the Reddit crowd as their focus widened to take on short-sellers in other asset classes, but they have struggled to make the same explosive impact.
Silver was the new focus. But spot prices slid nearly 9% on Tuesday, reversing most of the gains notched up in the previous two sessions and showing how much tougher it is for small investors to shift a global commodity than to move individual stocks.
With volumes in all the hot stocks collapsing, silver attack met by margin, Robinhood having to seek fresh collateral at a rampant speed, the signals that the retail mania could unravel rapidly are aligning, said Mark Taylor, a London-based equity sales trader with financial group Mirabaud.
GameStop and AMC shares, which small investors traded on Robinhood and other online platforms, are still more than double their Jan. 22 levels when the buying mania erupted.