Reddit stocks: what meme stocks are trending?

Reddit has become a hub for social-media driven traders and investors that have proven their ability to move the markets, injecting huge volatility into stocks like GameStop and AMC. But what stocks are grabbing attention on Reddit today?

Top Reddit stocks to watch

Below is a list of the top 10 most mentioned US stocks on the WallStreetBets thread on Reddit over the last 24 hours on December 31, 2021, according to data from Quiver Quantitative. Exchange-Traded Funds (ETFs) have been excluded.

  1. Tesla
  2. Nio
  3. Alibaba
  4. GameStop
  5. NVIDIA
  6. SoFi Technologies 
  7. Apple
  8. Advanced Micro Devices 
  9. AMC Entertainment
  10. Disney

Yesterday, Tesla recalled 475,000 Model 3 and Model S cars to fix issues the cars had with their rear-view cameras and trunk latches. The problems are thought to increase crash risk, according to a US auto safety regulator, although no crashes or injuries have been reported. Shares were down by 1.46% in trading. 

Shares of Shanghai-based EV company NIO have been having a terrible time in 2021. The company peaked at $63 in January and have fallen by about 40% since, much of that was in the last few months. This is fairly surprising given its most recent earnings saw triple digit growth. But the manufacturer had to halt its production amid Covid-19 and has failed to stack up to other competitors like Tesla. The rising threat of inflation is also heavily concerning for growth stocks.

Shares of China-based e-commerce giant Alibaba saw a bounce back of 7.2% yesterday after a three-day sell off. It appears to be linked to the company's announcement that it was considering selling its 30% stake in social media company Weibo (WB) to the state-owened Shanhai Media Group. 

GameStop, has been one of the best performers of the year - gaining over 700%. Options traders are also seem to be pricing in a big move for the company's shares, but this change hasn't been reflected in analysts' estimates. 

Shares of semiconductor stock Nvidia have fluctuated this week, adding to the stock's decline of nearly 10% over the month. Nvidia has benefited from the ongoing supply shortage and surge in demand for semiconductors. 

  

How to trade Reddit stocks

You can trade many of the hot stocks being discussed on Reddit with City Index.

Follow these easy steps to start trading Reddit stocks today.

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the company you want to trade in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade

 

The Reddit frenzy

Retail investors realised their potential power in early January 2021 when a loosely-coordinated strategy was formed on Reddit’s WallStreetBets chatroom to buy shares and out-of-money call options on stocks that were being targeted by short-sellers to push the price higher. The idea was to create a short-squeeze.

 

What is a short-squeeze?

A short-squeeze does what it says on the tin – it tries to squeeze short-sellers out of their positions. Short-sellers, mostly big institutional investors and hedge funds, bet that the price of a stock will fall but, as retail investors pile in and push the share price higher, they are forced to start buying the stock to try to limit their losses. The buying by the big players only fuels the share price higher.

You can read more about short-squeezes and how they can be predicted here.

 

David vs Goliath

The fact many of the stocks being targeted are fundamentally flawed or failing adds increased risk into an already volatile picture. GameStop is an out-of-favour retailer that sells physical video games during a time when games are mostly being bought online, while others like Blackberry are also laggards from the past.

With this in mind, it is unsurprising they were in the crosshairs of short-sellers that look for failing companies to bet against.  

But why are retail investors banding together to buy shares in flawed companies? This disconnect is partly explained by a growing resentment among the smaller players in the market, which disagree with the idea of large institutions profiting from a company’s failure through short-selling practices, creating what has been described as a ‘David vs Goliath’ battle.

It is important to note that not all the most actively-discussed stocks on Reddit are struggling or being targeted by short-sellers. Many of the most mentioned stocks, like Apple, are simply popular among the community.

 

Reddit stocks and volatility

The stark movements in stocks like GameStop has demonstrated the power and influence that social media-driven investors and traders can have on the market, having injected severe volatility into several stocks. Volatility presents opportunities for traders, and it doesn’t get more volatile than Reddit stocks right now – even during a pandemic.

For example, we saw GameStop - the first heavily-shorted stock to be targeted by social media-driven investors - go from below $19 at the start of 2021 to a new record high of over $347 by January 27, and the share price has remained highly volatile ever since.

 

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.