Popular meme stocks AMC Entertainment and GME skyrocketed during trading hours today. AMC is currently is up nearly 6% and GME is up 13%. The volatility of the meme stocks reversing from a downward to upward trend have retail investors speculating a the highly anticipated short squeeze could happen at any moment. Retail investors believe that  the quick reversal and rise in share price, as well as the consistent downwards trends of some of the largest hedge funds indicate that a short squeeze may be on the Horizon for popular meme-stocks like AMC Entertainment and GME. Meme stocks have been heavily shorted since 2020 and it’s only a matter of time before these funds will have to close their short positions. 

GameStop shares have been halted four times since market open today due to the abrupt volatility. AMC has not been halted today, however the trading volume has reached 41.5 million shares, which is more than the daily average of 36.6 million shares normally traded. Retail investors continue to be optimistic during this bearish market — and as today has shown anything is possible in a volatile market. Even with the market trending down, many investors are taking advantage of the dips on some of their favorite stocks like meme stocks AMC and GME.

Source: Google

While there is no real obvious news to explain the the sporadic increase of she share prices for the meme stocks, retail investors believe that it may be in part from institutional investors who are covering their short positions on the stocks. Reportedly AMC currently has a short interest of 19.5% and GameStop has a short interest of 21.4%. When a hedge fund closes a short position it can lead to dramatic fluctuations in the share price of the stock. Last June AMC hit a high of about $72 per share and currently it’s at about $11per share.  With these large short positions on the meme stocks, it can lead to volatile price fluctuations. Retail investors continue to drive up the price by buying in and holding, which simultaneously end up forcing hedge funds to close out the shorts. 

We know hedge funds like Tiger Global and Melvin Capital have been experiencing record losses. A large portion of their losses can be accounted for from their GME short positions in 2021 — and retail investors are anticipating that the downfall of hedge funds will continue to get worse considering the bearish market conditions. 

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