Reddit stocks: what stocks are trending?
Joshua Warner September 27, 2021 8:37 PM
Reddit has become a hub for social-media driven traders and investors that have proven their ability to move the markets, injecting huge volatility into stocks like GameStop and AMC. But what stocks are grabbing attention on Reddit today?
Top Reddit stocks to watch
Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours on September 27, 2021, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) have been excluded.
- TMC Metals
- Clover Health
- AMC Entertainment
Electric lifestyle firm Canoo shares popped over 21% on Friday to close at $9.04, its highest level since mid-July, as chatter about a potential short-squeeze gains traction.
Tesla shares ended last week at their highest level since February. The mood will be buoyant ahead of today’s trading session after CEO Elon Musk sent an email to employees over the weekend that said this would be the ‘most intensive delivery week ever’.
SmileDirectClub continues to grab attention as the next potential short-squeeze. The stock has lost over half of its value since the start of the year.
Investors continue to wonder where the bottom is for Alibaba, as shares continued to find lower ground last week to end at their lowest level since January 2019. The widespread regulatory crackdown in China continues to plague Chinese companies, especially those listed in the US.
TMC Metals ended last week at an all-time low since going public through a SPAC deal earlier this month. Its highly ambitious plan to produce battery metals by scraping nodules off the sea floor initially sparked excitement when it first listed but the stock has lost considerable ground as questions are raised about the cost of its plans. Reports surfaced last week that TMC had successfully derived an alloy comprised of high-grade battery metals from its pilot smelting plant.
GameStop continues to stir discussion amid the SEC investigation in the meme stock frenzy earlier this year. Last week, an investor Michael Burry tweeted Scion Asset Management had been issued a subpoena by the SEC in relation to the investigation before swiftly deleting it without explanation. Ascendiant Capital Markets cut GameStop’s target price to $24 from $25 this morning.
AMC shares may be in play today after the release of the new James Bond film proved supportive for other cinema chains. Shares in rival Cineworld jumped over 12% today in London on hopes that the film will be the biggest catalyst yet for the industry since it started to welcome back cinemagoers back to its theatres.
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The Reddit frenzy
Retail investors realised their potential power in early January 2021 when a loosely-coordinated strategy was formed on Reddit’s WallStreetBets chatroom to buy shares and out-of-money call options on stocks that were being targeted by short-sellers to push the price higher. The idea was to create a short-squeeze.
What is a short-squeeze?
A short-squeeze does what it says on the tin – it tries to squeeze short-sellers out of their positions. Short-sellers, mostly big institutional investors and hedge funds, bet that the price of a stock will fall but, as retail investors pile in and push the share price higher, they are forced to start buying the stock to try to limit their losses. The buying by the big players only fuels the share price higher.
You can read more about short-squeezes and how they can be predicted here.
David vs Goliath
The fact many of the stocks being targeted are fundamentally flawed or failing adds increased risk into an already volatile picture. GameStop is an out-of-favour retailer that sells physical video games during a time when games are mostly being bought online, while others like Blackberry are also laggards from the past.
With this in mind, it is unsurprising they were in the crosshairs of short-sellers that look for failing companies to bet against.
But why are retail investors banding together to buy shares in flawed companies? This disconnect is partly explained by a growing resentment among the smaller players in the market, which disagree with the idea of large institutions profiting from a company’s failure through short-selling practices, creating what has been described as a ‘David vs Goliath’ battle.
It is important to note that not all the most actively-discussed stocks on Reddit are struggling or being targeted by short-sellers. Many of the most mentioned stocks, like Apple, are simply popular among the community.
Reddit stocks and volatility
The stark movements in stocks like GameStop has demonstrated the power and influence that social media-driven investors and traders can have on the market, having injected severe volatility into several stocks. Volatility presents opportunities for traders, and it doesn’t get more volatile than Reddit stocks right now – even during a pandemic.
For example, we saw GameStop - the first heavily-shorted stock to be targeted by social media-driven investors - go from below $19 at the start of 2021 to a new record high of over $347 by January 27, and the share price has remained highly volatile ever since.
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