Reddit's market disruption and volatility continues with new instruments
For a week now, the hottest topic on the market has been the disruption taking place between the well-known Reddit forum r/wallstreetbets and the Wall Street giants. This disruption has caused the largest “short squeeze” in recent years, eliminating billions in funds in held short positions due to the sharp increase in the price of assets held by this group of small investors.
In the beginning, the battlefield was centred on GameStop (GME), which is an American multi-channel retail video game company which, due to the crisis generated by the coronavirus, was on its way to bankruptcy due to the dependence it has on the income generated by sales in its physical stores due to its large network throughout the world.
In just a few days, GME went from trading just under $ 20 to over $150 per share, and this momentum was reinforced when Elon Musk entered tweeted the meme “Gamestonk!!” while linking to the Reddit channel, leading the price to hit the stratospheric figure of $480 per share within moments, although during the last few trading days the volatility has been very intense, and is currently trading at around $222 per share.
Source: Admiral Markets MetaTrader 5. GameStop daily chart. Data range: from October 7, 2019 to February 2, 2021. Prepared on February 2, 2021 at 12:00 CET. Keep in mind that past returns do not guarantee future returns.
Price evolution in the last 5 years:
- 2020: 209.87%
- 2019: -51.82%
- 2018: -29.69%
- 2017: -28.94%
- 2016: -9.91%
After GME, Reddit turned their attention to other instruments, such as AMC and silver.
In the case of AMC, the increases have been less spectacular than in the previous case, but there have also been strong increases in a few days, taking the price to exceed 20 dollars from 5 dollars.
In the case of silver, the precious metal initally reached $30, causing some brokers to restrict precious metals trading, causing problems in that market. However, it seems that they are not able to substantially impact this market, as it seems too large for these retail customers to affect it in a prolonged way. Because of this, we have already seen sharp falls, reaching the upper band of the lateral channel that we have been following for the last few weeks.
Source: Admiral Markets MetaTrader 5. Silver daily chart. Data range: from October 30, 2019 to February 2, 2021. Prepared on February 2, 2021 at 12:20 CET. Keep in mind that past returns do not guarantee future returns.
Price evolution in the last 5 years:
- 2020: 47.66%
- 2019: 15.20%
- 2018: -8.57%
- 2017: 6.34%
- 2016: 15.08%
With the Admiral Markets Trade.MT5 account, you can trade Contracts for Differences (CFDs) of GameStop and more than 3000 stocks! CFDs allow traders to try to profit from the bull and bear markets, as well as the use of leverage. Click on the following banner to open an account today:
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
- With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- The Analysis is prepared by an independent analyst, Roberto Rojas (analyst), (hereinafter “Author”) based on their personal estimations.
- Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
- Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.