The Dow, S&P, and Nasdaq indices barely budged yesterday. Yet it was far from an uneventful day in the markets. Our old friends (and some new ones) the meme stocks were up to their old tricks. Led by none other than AMC, trading activity in several social media-powered stocks went haywire.
Last week we highlighted AMC, HMBL, MVIS, and SIRC as stocks that were set to explode. You can read about that here.
Insider Financial subscribers that jumped in on the AMC, HMBL, and MVIS momentum have indeed enjoyed some explosive gains. SIRC may be saving the fireworks for the 4th of July; we still like the long-term potential there.
Look for the volatility in social media’s chosen ones to continue this week and possibly into next week. The resurgence of momentum names popular in the Reddit WallStreetBets forum likely has more to go based on the immense chatter and trading volume.
It’s interesting that the two big meme stock surges happened in January and May/June when colleges go on break. With social media investor platforms presumably loaded with young 20-somethings, this may not be a coincidence. More free time = more time to plot the next short squeeze attack?
Squeezes on high short interest stocks are driving many of the biggest gains. And with short interest still high on many names, some rallies may just be warming up. BBBY, for example, jumped 62% yesterday in massive volume. Considering short interest is still over 30% of the float, if the hype continues on social media, the January peak of $53.90 could soon be eclipsed.
Somewhat lost in the shuffle has been rising oil prices that have lifted the energy sector. Meanwhile, investors’ apparent lack of concern for rising inflation pressures persists. Ditto for the potential impact of President Biden’s tax plan to fund infrastructure spending.
On Thursday and Friday, the market will turn its attention to a slew of employment data to assess the progress of the U.S. labor market recovery. But it may be more of a quick glance if retail rebellion on Reddit, iHub, Twitter, and Stocktwits continue to steal the show.
Today we focus our attention on AMC, HMBL, NAKD, and SNDL. Four big headline-grabbing stocks on the run.
MOMENTUM BUILDERS TO WATCH #1 AMC
When we wrote about AMC last week, momentum in the popular meme stock was just starting to build. That article can be found here.
Fast forward to this week and the run has grown to epic proportions. Insider Financial subscribers have seen the stock nearly quadruple since May 26th. AMC rode the rocket emoji as high as $77.30 on June 3rd.
The movie theater chain has been the market’s featured presentation over the past week.
As in January, the fire was stoked by ongoing bearish sentiment from Wall Street analysts and rumblings of an imminent short squeeze.
Last week we noted that short interest was still almost 100 million shares. This signaled to us that there could be plenty more to the squeeze.
Indeed “squeeze the shorts” proclamations continued to swirl around social media. As more and more people kept buying tickets to the show, AMC shorts scrambled for the exit.
With popcorn and cracker jacks strewn about the floor, AMC decided it was a good time to sell some more stock while the getting was good.
The company raised $230.5 million in a stock sale to Mudrick Capital Management. The freshly issued shares were still warm when the hedge fund decided to sell them later the same day. The stock market’s version of ‘House Flippers’ failed to faze investors though, who kept piling into AMC.
In hindsight, Mudrick could’ve banked a much bigger profit had it sold them a day later. Nevertheless, it was a shrewd move.
Adding drama to the plot, AMC announced the launch of the “AMC Investor Connect” loyalty program. The online platform is a means to communicate with retail investors and comes complete with exclusive screenings, discounts, and free popcorn. As if WallStreetBets users needed more incentive to buy the stock.
Sticking with the playbook of selling shares when its stock is hot, AMC then set out to raise more cash. This morning the company filed to sell as many as 11.55 million more shares. The SEC filing was accompanied by a warning:
“We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last. Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”
The latest plot twist caused the stock to dip back below $40 on Thursday, before finding support.
Many of AMC’s theaters are still closed and movie studios are increasingly going the streaming route. But none of this matters to investors.
In the guise of wanting to help save the company from bankruptcy (as opposed to making ridiculous sums of money on the stock) retail investors are all in on AMC. With the powerful herd now in control of roughly 80% of the shares, it’s going to be hard to stop this runaway train.
MOMENTUM BUILDERS TO WATCH #2 HMBL
HMBL has been a regular feature here at Insider Financial. Long-time subscribers may recall we started covering the stock when it was trading at less than $0.03. That story can be found here.
We most recently caught up with the fintech company as it was building momentum last week. That’s when it announced the launch of the HUMBL NFT Gallery, a marketplace for non-fungible token (NFT) creators and buyers.
HMBL’s move into the NFT space makes sense to us because it fits well with the company’s other e-commerce offerings. Humbl Marketplace, Humbl Pay, and Humbl Financial all have the potential to be strong revenue generators as the world economy goes digital and gravitates towards cryptocurrency.
The social media chatter has been heating up in recent days. In the process, HMBL went on a seven-day winning streak through June 1st. This was reminiscent of when the stock started February on a six-day run from $0.35 to $1.71.
This time around HMBL was trading in post-reverse-split terms but the gains were still substantial. The stock more than doubled during the stretch. Those that hopped in after our May 26th update still saw a quick 37% rise.
We think this is just the tip of the iceberg. Over the long term, HMBL has tremendous potential to grab share in its markets. The early-stage fintech is moving towards launching an international payments platform that can connect merchants and consumers from all over the world and facilitate crypto payments. Its overseas expansion efforts have thus far faced hurdles amid the pandemic, but as economic uncertainty lessens, we expect more partnerships to develop.
HMBL secured an interesting partnership this week. On June 2nd, it announced a strategic collaboration with California-based sports agency Athletes First. The firm is being brought on as a consultant to help HMBL develop new business areas like NFTs, digital media, and ticketing. Athletes First has 400-plus clients nationwide consisting of professional athletes, coaches, broadcasters, and front office personnel.
Last week the company’s cash position was bolstered by a pair of new financing deals worth a combined $2.5 million. This took the form of 22-month, 8% convertible debt that is convertible at $1.00 per share. It brought the cash balance to more than $6 million.
Part of the investment was made by Australia-based Archura Capital Pty Ltd. This could pave the way for additional partnerships in the country. Longer-term, the funding is a step in the right direction to get to the $50 million target as outlined in HMBL’s equity financing agreement with Brighton Capital.
Since climbing as high as $1.75, HMBL has taken a breather the last couple of days. It remains an inexpensive way to gain exposure to global growth in mobile payments and digital assets.
MOMENTUM BUILDERS TO WATCH #3 NAKD
NAKD is another one of our favorite penny stocks. We started covering the stock in January when it was trading below $0.50 which you can read here. We called for a major short squeeze and two sessions later NAKD ran to $3.40.
After some profit-taking set in, a weekslong sideways pattern kept the stock rangebound between the $0.50 and $0.75 levels.
Investor interest in the intimate apparel company has returned this week. For the first time since early March NAKD traded at the elusive $1.00 mark.
This is an important threshold because it relates to a key Nasdaq listing requirement. On April 29th, the company received a notice of non-compliance from the exchange for its bid price hovering below $1.00 for 30 straight trading days. NAKD had 180 days from that point to regain compliance by posting a closing bid price of at least $1.00 for a minimum 10 consecutive days. It has yet to post a buck-plus closing price, but with the stock trending upward in recent days and still five months to fulfill the requirement, things are looking better.
That has given new hope to social media platforms where the chatter has been picking up. NAKD is one of the most talked-about penny stocks on Reddit’s WallStreetBets.
While there haven’t been any press releases since Naked Brand announced the closure of the Bendon divesture on April 30th, that hasn’t stopped investors from buzzing about another potential squeeze.
With a little over 40 million shares held short, the short interest is 9.5% of the float. This figure may sound familiar to Insider Financial subscribers. In the days leading up to the January short squeeze, 9% of the float was short.
Let’s just say social media investors are still intimately involved with NAKD—and are hoping shorts are once again caught with their shorts down.
MOMENTUM BUILDERS TO WATCH #4 SNDL
SNDL is another big short squeeze in the making. We’ve written about the Canadian cannabis play several times.
Subscribers that were with us on January 12th remember when we said SNDL was “extremely undervalued at current levels”. That article can be found here. About a month later, SNDL had run 491%.
This Nasdaq penny stock has found its way back above the key $1.00 level this week in convincing fashion. On Tuesday, it closed at the $1.00-plus mark for the first time since April 9th. In the process, SNDL crossed the 50-day moving average line, a bullish move that suggests the uptrend has resumed.
SNDL may be on its way to regaining Nasdaq’s minimum bid compliance. It closed at $1.13 on Wednesday and the rally kicked into full gear on Thursday.
This is when the social media discussion gained steam and volume increased for the second straight day. Investors are buzzing about the cannabis stock’s potential to not only regain its listing status but set out on another epic short squeeze journey.
The cannabis group as a whole is benefitting from a wave of M&A activity. Industry consolidation could create a more financially secure medical and recreational cannabis market. With SNDL carrying no debt on its books, investors are betting that it may emerge as one of the stronger players.
Cannabis stocks are also up thanks to an unexpected Amazon effect. On Tuesday, the e-commerce giant’s new retail chief Dave Clark blogged about Amazon’s support of federal marijuana legalization.
Mr. Clark said, “And because we know that this issue is bigger than Amazon, our public policy team will be actively supporting The Marijuana Opportunity Reinvestment and Expungement Act of 2021 (MORE Act)—federal legislation that would legalize marijuana at the federal level, expunge criminal records, and invest in impacted communities. We hope that other employers will join us, and that policy makers will act swiftly to pass this law.”
SNDL was among the most impressive short squeeze stories of early 2021. It ran all the way to $3.96 on February 11th, just seven sessions removed from trading under a dollar.
None of the five analysts that cover the stock call it a buy and most price targets are below $1.00. Short interest represents 15.5% of the float.
The stage appears to be set for “squeeze the shorts” round two, SNDL version.
As we keep saying, there are always opportunities in the markets and it’s our job to find winning stocks before they run for our subscribers. Huge gains can be made in such a short amount of time.
If you like any of these 4 stocks, our best advice is to be patient and throw bids in below the market. Buying dips and selling rips as swing trades remains the best strategy.
It’s also important to look for stocks that have yet to run. There are plenty of opportunities out there and we screen hundreds of penny stocks each week looking for the best alerts for our subscribers.
Remember, all it takes is one or two to become a winner and you’ve crushed the market indices for the year.
As always, good luck to all (except the shorts)!
WHEN INSIDER FINANCIAL HAS A STOCK ALERT, IT CAN PAY TO LISTEN. AFTER ALL, OUR FREE NEWSLETTER HAS FOUND MANY TRIPLE-DIGIT WINNERS FOR OUR SUBSCRIBERS. WE SPECIALIZE IN FINDING MOMENTUM BEFORE IT HAPPENS!
Disclosure: We have no position in any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.