Key Takeaways
- Pandemic-era meme stocks GameStop and AMC Entertainment rose more than 70% on Monday, potentially triggering a selling squeeze where investors rush to cover short positions.
- Monday’s meme stock rally caused nearly $1 billion in losses for GameStop short sellers, according to data from S3 Partners.
- GameStop shares could sell near a previous price action resistance zone between $37.50 and $63.50.
- AMC Entertainment shares encounter a confluence of resistance around the $13 50-day moving average and a horizontal line extending to the March 2020 low.
Pandemic-era meme stocks GameStop (GME) and AMC Entertainment (AMC) rose more than 70% to multi-month highs on Monday, stirring memories of the social media-fueled meme stock frenzy that swept Wall Street in January 2021.
During that crazy month, traditional video game retailer GameStop saw its shares soar seventeen times, while shares of movie theater chain operator AMC jumped six times, causing significant losses for hedge funds that held short positions in either stock. .
Monday’s rally — reportedly triggered by the online meme “Roaring Kitty” making her first X post in three years — caused nearly $1 billion in losses for GameStop short sellers, according to data S3 Partners cited per CNBC. This could fuel further gains in the coming days, driven by a short squeeze, an event in which investors rush to cover their positions, putting additional upward pressure on prices.
Below, we take a closer look at the charts for both meme stocks and point out important levels to watch in the coming trading sessions.
GameStop
Taking a look at the weekly chart, GameStop’s share price has remained entrenched in a descending channel since peaking in January 2021 at the height of the social media-fueled meme stock rally. In recent weeks, shares have moved higher toward the pattern’s upper trendline, which closely aligns with the 50-day moving average, indicating growing bullish sentiment. Furthermore, Monday’s 74% upside gap opens the door for follow-on buying, given that the move occurred on above-average volume and that the price closed above the closely watched 200-day moving average.
Looking ahead, investors should keep an eye on an area between $37.50 and $63.50, a region on the chart where the price could encounter selling pressure from a resistance zone from previous price action. A break above this level could lead to a retest of the stock’s all-time high (ATH) at $120.75.
After gaining 74% during regular trading on Monday, shares rose another 21% to $36.90 in after-hours trading.
AMC Entertainment
Also looking at the weekly chart, AMC shares have traded mostly within a descending channel since rising above $390 in June 2021, except for a breakout of the bull trap during the summer months of last year. Interestingly, the stock’s volume has increased significantly since then, while the price has continued to reach new all-time lows. More recently, buyers have piled into shares near the channel’s lower trendline, potentially as news of an upcoming meme rally gained momentum on social media platforms.
In the coming days, investors should monitor the $13 level, an area on the charts where traders can book profits near a confluence of 50-day moving average resistance and a horizontal line extending to the pandemic-era low March 2020.
After rising 78% during regular trading, AMC shares gained another 24% to $6.42 in extended trading Monday.
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As of the date this article was written, the author did not own any of the above securities.
