The meme stock phenomenon is back with a bang, as exemplified by the recent surges in the shares of Reddit and former President Donald Trump‘s Truth Media. This resurgence has prompted experts to offer three key criteria for identifying potential meme stocks.
What Happened: The meme stock trend, characterized by intense trading in individual stocks, has made a remarkable comeback. The shares of Reddit, the platform that gave rise to the meme stock phenomenon, soared by up to 120% following its IPO last week, reported business Insider.
Similarly, Truth Media, the stock linked to Donald Trump, experienced a one-day gain of up to 59% after its SPAC debut on Wednesday. These events suggest that meme stocks have made a strong return, according to Steve Sosnick, chief market strategist at Interactive Brokers. He offered three criteria for identifying potential meme stocks:
- Social Media Fuel: The original meme stock rally was driven by an “us versus them” mentality on social media. This enthusiasm can also be found in certain cryptocurrency circles and Truth Media due to its association with the MAGA movement.
- Emotion-Driven Investing: Investors who are emotionally attached to a company or story may disregard standard valuation metrics, leading to irrational investing behavior.”If one’s investment decisions are based primarily upon emotions, then it ...