“Meme Stock” is a stock that has a significant increase in trading volume over a short period of time. And the increase in trading volume is not due to fundamental factors such as the company's performance. But because of the news that is passed on the social media world, such as group lines whose members are retail investors or a website where individual investors gather to exchange stock market information.

When there is a continuous stream of news that stocks also known as viral, it causes trading and causes significant price changes in a short period of time. As a result, the price moved higher than the appraised value.

Sample of meme stocks.

Top meme stocks mentioned earlier this year include GameStop (GME), AMC Entertainment Holdings, Inc. (AMC), BlackBerry (BB) and Bed Bath & Beyond (BBBY). Performance has not been good during the past year. But it turned out to be popular and the price rose sharply in late January 2021.

For example, GameStop (GME) stock, which at the beginning of January 2021 was priced at $17.25, which has been in the same range for the rest of 2020. After that, on January 28, 2021, it closed at $483.00. increased by approximately 2,700% without any fundamentals of earnings. But because the news spread so quickly that it became a trend on social media that Hedge funds short sell such shares (Short Sell is to borrow shares to sell. During the severe decline in the stock market), retail investors gradually bought GME shares, causing the price to rise significantly.

When the stock price goes up, short selling funds are forced to close their positions for the main reason: unrealized losses. This may continue to increase, so stock lending brokers will start to worry about whether funds will actually buy back the shares they borrowed. There may be measures to call for collateral money. And another thing that might happen is that the owner of the lent stock may demand it back because the price has gone up. therefore wanting to sell it for a profit As a result, funds that are short selling have to use the money to buy stocks in the market back or get short squeeze, thus accelerating the share price to rise even more (Short Squeeze is the nature of buying stocks that are very short sales and have The volume of stocks circulating in the market at that time was low. to pressure those who undertake short sales transactions to expedite the purchase of shares to deliver them back)

How do meme stocks move and how do they cycle?

Movements and cycles of meme stocks It was caused by a number of investors that some stocks were undervalued and started to buy in large quantities. Until the price of that stock began to slowly increase. Later, another group of investors began to notice the movement of the stock with increasing trading volume and price. Therefore they were bought accordingly.

As a result, the share price skyrocketed according to demand. And eventually, news about that stock will spread online. Until the phenomenon of FOMO (Fear of Missing Out) that makes investors who do not have this stock in their possession fear that they will miss it. Will rush to buy because it is expected that the share price will increase further and can make a profit. Ultimately, it will be the peak of the trade because those who have started their investment will start selling when they see a profitable spread.

After the sales force came out continuously from the beginning of gradual selling to make a profit. causing investors to start to worry that if holding this stock may continue to lose, resulting in selling pressure until the share price eventually declines It can be seen that the profitees are those who started investing in the first place and the group that may lose is the group that is afraid that they will miss out on having this stock in their possession and buy it during the high selling price. already

Since meme stocks are investments that are not based on fundamentals but on investment flows in stocks that are expected to generate returns in a short period of time, it is imperative for people to use this type of stock investment strategy. must monitor the situation around whether it is a stock to invest Has the price been high? How much more profit is possible? Is the information obtained from online media reliable or not in order to assess potential risks compared to returns

Although in the past, the trend of investing in meme stocks has happened once in a while. But when social media communication plays a role in investment continues to rise. May result in the phenomenon of stock memes more as well. Therefore, before making an investment decision, it is important to consider the risk first. Because this type of stock does not have any fundamentals to support it, if the investment goes wrong, it will cause a lot of damage.