The meme stock mania is back, with GameStop, AMC Entertainment, and others roaring higher. The Daily Breakdown takes a deeper dive.
Tuesday’s TLDR
- GameStop leads meme surge.
- Coca-Cola shares inch toward 52-week highs.
- Alibaba declares a dividend.
What’s happening?
The Dow’s winning streak came to an end, while the S&P 500 ETF — SPY — climbed for its eighth straight daily gain. But that’s not what anyone was talking about on Monday.
While it was another low-volume quiet day for the indices, there was a bit of meme-stock resurgence on Wall Street.
GameStop roared higher by 74.4% on the day, while AMC Entertainment climbed 78.4%. These moves are continuing in Tuesday’s pre-market session. Other stocks like Tupperware, Groupon, and iRobot also benefited from the rally.
What sparked the move?
Keith Gill — known online as “Roaring Kitty” — tweeted for the first time since June 2021, sparking an eruption in these so-called meme stocks. Gill was considered a key figure in the short-squeeze stock run from late 2020 to early 2021.
Is this a ridiculous catalyst? Yes.
Can it last? No.
There might be some sizzle and some fireworks, but these types of moves are simply not sustainable over the long term.
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The setup — KO
Shares of Coca-Cola came within 28 cents of hitting new 52-week highs on Monday, as the beverage conglomerate continues to chug higher.
This stock has rather quietly rallied in 18 of the last 19 sessions and is currently riding a nine-day win streak.
When a stock clears resistance (like Coca-Cola did with the $61 area) and puts together a rally like this, it’s in a clear uptrend. For active investors, that makes it a candidate for “buy the dips.” But patience is important in those cases, too.
Perhaps KO is one to add to your watchlist to see if it pulls back to a trending moving average (like the 21-day) or if it dips back to prior resistance (like $61-ish) and finds support.
Options
If we do see a dip in KO — or if bulls think the stock can continue higher — calls or call spreads could be one way to participate in a move higher. Conversely, those who believe the stock will pull back can speculate with puts or put spreads.
Remember, the max risk for buying options is the premium paid. For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street is watching
HD — Home Depot reported earnings of $3.63 a share, beating expectations of $3.59 a share. However, revenue of $36.4 billion declined 2.4% year over year and missed analysts’ estimates by $250 million. The stock enjoyed a massive rally off the Q4 lows, climbing more than 44%, but it has since been under pressure, down about 14% from the 2024 highs. Is it enough for a relief rally or will a mixed quarterly report fail to jumpstart the stock?
BABA — Alibaba shares are down about 4% in pre-market trading after the firm reported a slight earnings miss, but a revenue beat as sales grew 7% year over year to $30.7 billion and topped estimates by $310 million. Alibaba also initiated an annual dividend of $1.00 a share and declared a special one-time cash dividend of 66 cents a share.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.