Short Squeeze
By Tue, Jul 21, 2020
Hey Scoopers,
It seems that optimism turned into greed and forced trillion-dollar companies to jump without reason. — More on that in the “Overall Market” section.
Beyond the overall market, work-from-home stocks rally unanimously, while analysts couldn’t agree on the target price of a vaccine frontrunner. — More on that in the “What’s Up?” and “What’s Down?” sections.
Oh, by the way, don’t underestimate the power of a short squeeze. — More on that in the “Water Cooler” section.
But, first, here is a recap of what happened in the market yesterday:
Market Recap
- U.S. markets: All three indices started the week on high notes. Scroll down to the “Overall Market” section to read more.
- Cryptocurrency: You don’t need us to tell you what’s Bitcoin’s price. It’s exactly what it was yesterday, and almost every other day in the last week or so. What’s going on? We’ll dig into the cryptocurrency market later this week. This sideways movement is not normal. Something gotta give!
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Greed Is Taking Over
The Nasdaq is back and roaring as the news of multiple COVID-19 vaccine developments keep investors optimistic. The movements are anything but unexpected. Giant trillion-dollar companies such as Amazon and Microsoft moved quite a few percentages higher than Friday. And, on Friday, those were not undervalued companies by any mathematical calculations. The optimism is turning into greed. The question is, how long can greed last?
Which One To Talk About?
So, what happened?
Shares of several so-called Work-From-Home were up unanimously on Monday. From Amazon (Ticker: AMZN) and Shopify (Ticker: SHOP) to Fastly (Ticker: FSLY) and Ping Identify PING) most work-from-home stocks resumed their upward rally. The market is happy and giddy, and people believe “stonks” only go up! Some people attribute this type of behavior to the sign of a bubble similar to the 1990s. Intelligent investor beware!
The #1 Stock for the Electric Car Boom
Former Wall Street whiz kid says there’s one small company at the epicenter of the $3 TRILLION electric car boom… and very few people are paying attention to it right now.
One Thing Analysts Agree On
So, what happened?
Shares of Moderna (Ticker: MRNA) were down more than 13% on Monday. We’ve been discussing this stock for a while. It’s one of the Covid-19 vaccine developers in collaboration with Pfizer (Ticker: PFE), and last week got a big nod of approval from Goldman with a $105 price target. On Monday, analysts from JPMorgan downgraded the stock to Neutral with an $89 price tag. Analysts may not agree on the price target, and we think it’s a fool’s game to try to predict who wins the race to the vaccine, but one thing they all agree on is that the race to the vaccine is worth investing in.
The Role Of A Short Squeeze
So what happened?
The stock market is nearing euphoria. When trillion-dollar companies such as Amazon and Microsoft jump 5% to 7% in one day, even off of a quite strong rally, the market is entering the euphoria. However, there is one more force at play. A short squeeze is undoubtedly playing a significant role here.
Several companies have been growing in value quite rapidly, and that must have encouraged big funds to take a short position, betting on the rapid price decline of such stocks. However, good news such as possible COVID-19 vaccine could have pushed the stocks slightly higher, forcing the short sellers to purchase stocks at that higher price to cover their bet. And, subsequently, the stocks were pushed even higher. The power of short squeeze in volatility markets is quite impressive, to say the least. #JustOurOpinion
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About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
