GameStop’s meteoric gains have almost entirely disappeared — here’s advice for those who didn’t get out in time
By Steve Goldstein
Critical information for the trading day
Getty Images/iStockphoto
The author of the Cracked Market blog, Jani Ziedins, last week warned the traders piling into the videogames retailer GameStop not to get greedy — or more specifically, not to be a pig.
Well.
As the chart shows, that short squeeze worked until it didn’t. Momentum fizzled after Robinhood and other brokerages limited access to trading in GameStop GME and other securities that were surging in popularity. As to why, there will be Congressional hearings to find out the culprit — hedge funds or good-old-fashioned margin requirements — but the end result is the same.
GameStop may still have its moments. “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,” Ziedins says.
Here’s Ziedins’ advice now. “For those that still have money left in the market, there is no reason to ride this all the way into the dirt. Cash in what you have left, learn from this lesson, and come back to the market better prepared next time,” says the Cracked Market blogger.
Cue, Frank Sinatra.
And those traders are inexperienced. Cardify, a consumer-data firm, did a survey of 1,600 self-directed investors in GameStop and cinema chain AMC Entertainment AMC and found that most were inexperienced investors — 44% having less than 12 months of experience, and another quarter with one to two years’ experience. Nearly half made their biggest-ever do-it-yourself trading investment in the last four weeks, according to the survey that ended on Monday.
Why? Of these overwhelmingly young and male investors, 45% said for quick financial profits. Nearly 20% said it was part of a long-term investing strategy, and 16% said to spite big hedge funds and institutional investors, according to Cardify.
The buzz
The nonfarm payrolls report for January is due at 8:30 a.m. Eastern. Expectations are building after solid jobless claims and other reports this week, with Bloomberg reporting the economist consensus has risen to 100,000 from 50,000. An unusually large number might get dismissed as a quirk in seasonal adjustment rather than a change in the underlying economy.
The U.S. Senate in the early hours of the morning approved a budget resolution that will allow for a fast tracking of the $1.9 trillion coronavirus relief plan proposed by the Biden administration to be approved without Republican support. Vice President Kamala Harris cast the tiebreaking vote. Johnson & Johnson JNJ meanwhile submitted its coronavirus vaccine for Food and Drug Administration approval.
Pinterest PINS shares jumped 11% in premarket trade, as the art-sharing social-media service reported forecast-beating earnings on a 76% jump in revenue during the fourth quarter. Another social-media service, Snap SNAP, also beat expectations. Besides using social media, people stuck at home were playing videogames, as Activision Blizzard ATVI gained 8% after it reported stronger earnings and bookings than expected, increased its dividend by 15%, and authorized a $4 billion share buyback plan.
Ford Motor Co. F reported a surprise profit and topped expectations.
Exercise-bike maker Peloton Interactive PTON slumped 7% as it did beat on earnings but flagged a rise in shipping and other costs. T-Mobile US TMUS, the mobile service operator, also beat earnings expectations but guided to a softer 2021 than expected.
Luckin Coffee, the U.S.-listed Chinese coffee retailer, filed for bankruptcy protection, less than a year after an accounting scandal.
The market
After the S&P 500 SPX ended Thursday at a record for the sixth time in 2021, U.S. stock futures ES00NQ00 pointed to another day of gains.
The yield on the 10-year Treasury BX:TMUBMUSD10Y moved up to 1.16%, after ending Thursday at its highest in 11 months.
The chart
The more things change, the more they stay the same. Today’s technology giants are following a similar trajectory to the radio makers of the 1920s, as well as the dot-com era around the turn of the century. “So the point is that you can be a firm believer in tech’s ability to transform our lives but still think valuations might be in a bubble,” said Jim Reid, strategist at Deutsche Bank.
Random reads
This local government meeting over Zoom ZM turned into a chaotic, internet sensation.
Chocolate sales were 40% to 50% higher in areas with an increased number of COVID-19 cases, according to confectioner Hershey HSY.
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