When the Nasdaq and S&P 500 index started to weaken before the Fed rate hike announcement, meme stocks lost momentum. After the Santa Claus rally, momentum trading may return. Meme stocks may flourish again.
Meme stocks get buyer buzz when someone creates a meme with a catchphrase. AMC Entertainment (AMC) and GameStop (GME) are examples of such stocks that are still a multi-bagger return from lows. Though the Fed will tighten the money supply by buying less debt, it is raising rates, too. This could prevent meme stocks from gaining any traction. Still, investors will suffer from FOMO – fear of missing out. As the S&P 500 finds new highs after a strong 2021, they may trade some meme stocks. The allure of buying a penny stock for a double or a triple is high. Speculators often ignore the risk of holding stocks at the top as others sell.
Meme stock traders should watch the crypto market. Look for Bitcoin prices to hold the $50,000 level. Watch the Nasdaq index for signals of weakness. If Bitcoin prices weaken and the Nasdaq is negative, then avoid meme stocks. AMC and GME stock will spike briefly on the days markets are in a mood to speculate.
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