The stock market has been undergoing a period of sustained volatility over the past two months as the FED grapples with taming what appears to be the untamable inflation rates. The S&P 500 volatility index was close to 35 two days ago and has gone down to 31.70 as the market imploded on Friday. That divergence was a tiny green shoot for the bulls when trading gets started on Monday. Bucking the downward trend are two of the newest APE stocks Global Tech Industries Group Inc. (OTCMKTS: GTII) and FingerMotion Inc. (NASDAQ: FNGR), as AMC Entertainment Holdings Inc. (NYSE: AMC) APEs jump ship. FNGR was a top gainer, overbought, and had an unusual volume on Friday. FNGR was up 82%, and GTI was following close behind at up 74% in what most would describe as a terrible market.
Overlooked Fundamental Story – Focused on Momentum
The momentum in these names is so strong it’s likely to continue the march higher. Blood is in the water, and the APEs know the shorts are bleeding. The frenzy on social media is building this weekend. FNGR is unlike any other APE stock before it because there is a real fundamental story that easily justifies Argus Research’s $6.50 fair value estimate. FNGR is the Chinese equivalent of Snowflake (NASDAQ: SNOW), the big data company that helps its customers optimize the monetization of their user base.
Many APE investors completely disregard the company’s fundamentals and are investing because they have an agenda, which is, quite frankly, to crush the shorts. GTII has a cast of nefarious financiers outlined in this video who were shorting the stock into oblivion, and the APEs stood up and said not on my watch. Lou Versus Wall Street is the ring leader with many YouTube followers and videos on GTII. In his GTII Recap video (4:10), he gives guidance on how to exit and mentions his next play is FNGR on “Monday, Tues, Wed.” Other groups like Teddy Zane were piling on in the weekend session. The last time YouTubers piled onto FNGR stock in January 2021, the stock moved from $8.00 to $17.50
It’s a little unclear how FNGR got pulled into the scenario. Still, the shorting was pretty obvious after the company did an above-market barely dilutive debt financing to kick start their device protection insurance business in China. It’s a quasi-monopoly with a huge first mover advantage, offering device protection to potentially over a billion Chinese as they upgrade their phones to 5G. There are 30 provinces in China, and investors could see each province generating about 1 million new phone sales monthly after their market test is complete. The company indicated that one new province would be rolled out monthly, and the user base would grow geometrically. That could mean 6 million subscribers in just one quarter and the possibility of 21 million in 2 quarters spanning six provinces. In the United States, device protection runs $6/month. FNGR has not unveiled their fee cut, so investors will have to use their imagination to figure out future revenue. It has to be less than $1.00/month because, after just six months, it would be on a $240 million annual profit runway that seems far-fetched, but is it?
Not Just Device Protection – Chinese Version of Snowflake
FNGR is more than just a device protection insurance company. The real value lies in the Big Data technology that can extrapolate behavioral algorithms in real time. They have spent the past 2 years perfecting their craft and are in the process of monetizing 1.4 billion users from China Mobile and China Unicom. Looking beyond the device protection insurance business is healthcare, life, and car insurance for the Chinese. They have partnered with Munich RE and Pacific Life, but there could be more insurance companies in the pipeline. There is still no guidance on when or how fast these insurance companies will monetize the technology but is coming, and there is transformative revenue potential when they do launch these initiatives. The company also has a bustling Top-up business that allows cell phone users to recharge their prepaid phones, representing the majority in China. Their core product is SMS messaging which is highly regulated and censored by the regime. SMS messages in China cost money, and FingerMotion ensures there is no derogatory content about the regime in the body of the SMSs.
A recent Seeking Alpha article laid out more of the fundamental story.
When it comes to APE stocks, the trend is your friend. There are some milestones to look out for. FNGR is a NASDAQ stock which means it could be marginable once it passes $4.00 to $5.00. A couple of closes above $5.00 on healthy volume could entice brokerages to offer margin privileges. Should this happen, it would mean a lot of dry powder that could be leveraged from existing APE’s to lever up and buy more. There could also be margin calls on existing short positions by Wednesday if the prices stay up, forcing market buy liquidations.
DD Amanda Expose Achilles Heel of Shorts
DD Amanda is a technical analysis screener with some proprietary indicators very well suited for stocks that run. The program has a drag ratio that tells how easy it is to go up or down. The video analysis of FNGR and GTII shows that upside drag is maxed out at an extreme. This normally means the stock will go down. Still, upon further review, a pattern was recognized whereby the shorts in GTII could only hold the line so long before they eventually had to let the price move higher for lack of capital to squash it. FNGR is following in the same footsteps as GTII, which means Monday may see a lot of buying absorbed by the shorts with little price appreciation. This pattern would be followed by another wave of intense buying that breaks through resistance. Some technical levels to watch for are $4.10 and $4.70. Once it crosses through resistance, another wave would propel it to the next level of resistance. The strategy of the APES is simple – overwhelming firepower keeps it going because the higher it goes, the more urgent it becomes for the shorts to cover. The key is to buy enough to force the shorts to cover.
Low Float Adding to Volatility
FingerMotion has only 10 million shares parked at DTCC. There were 12 million shares shorted on Friday alone, according to the FINRA report. There will be a significant failure to deliver, leading to market buy-ins by the brokerages that initiated short positions. Another thing investors must consider is that before the stock went APE, the stock was maybe trading 50,000 shares daily, which is indicative of an even tighter float. Some strategic investors in the company are not sellers but have their shares at DTC. This could mean there are only really 5 million shares. Imagine the shorts realize they made a miscalculation or mistake and start tripping over themselves to cover their position.
If history serves as our guide, the conditions are ripe for both of these APE stock plays. Investors will need to have strong constitutions because there could be some really fast money made in these names, but there is also the risk of loss. So far, buying the pullbacks has worked, but the stocks are getting to the stage where they are itching to run, and FOMO requires hitting offers and shorts to feel some serious pain. Many investors may be too slow to respond and miss the run. If any long-term investors are reading this, then looking at the fundamental side of FNGR might be a good idea. The company is executing its business plan with revenue from multiple business segments. Even though this stock has had an epic run, it is still undervalued. The Chinese e-commerce stocks were summarily sold off during the first quarter after the Chinese imposed harsh regulatory crackdowns related to the sharing of customer information that stemmed from Didi Global (OTCMKTS: DIDIY). FNGR was unfairly sold off and guilty by association. The stock was trading at the low end of its $5.00 range before the regulatory crackdowns hit. Also look at all the social media momentum over the weekend. The messages on stock twits, YouTube, and twitter are trending. APEs got their first taste of victory with GTII and there is still a lot of meat on the bone. The fresh new target is shaping up to be FNGR and its barely started its run not even close to its fair value at $6.50. Here is more evidence that the APE forces are organizing for a Monday rout of the shorts.
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