Trump Media stock is surging. Could this be the emergence of another meme frenzy protagonist?
- Trump Media (DJT) mirrors GameStop and AMC’s meme stock characteristics, including a compelling narrative, social media visibility, and extreme volatility.
- Short-selling expert Ihor Dusaniwsky suggests a potential “mother of all short squeezes” for DJT, with technical indicators hinting at a bullish trend.
- While DJT’s float is lower compared to GameStop and AMC, intense demand for shorting poses risks for short sellers.
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Trump Media As The Hottest Meme Stock
Trump Media (DJT) has displayed all the hallmarks of a hot meme stock, particularly since its debut on the stock market in late April.
- Compelling narrative: DJT has traded as if it were an underrated company experiencing an improbable turnaround or embroiled in an unfair situation for investors, possibly involving illegal trading practices by short sellers.
- High visibility on social media: The stock has garnered widespread attention on platforms like Reddit and others, especially among retail investors who are Trump supporters.
- Extreme volatility: DJT has seen drastic price swings due to speculative trading and rapidly shifting investor sentiment, despite little correlation with underlying business fundamentals.
- Mainstream media attention: Since the merger leading to Trump Media’s IPO, the company’s stock has received considerable mainstream media coverage, further amplifying its impact on the market.
- Potential for short squeeze: Similar to other meme stocks, Trump Media has experienced frequent short squeezes. Despite a reported short interest of only 15%, the cost to borrow exceeds 700% due to the limited availability of shares for borrowing, with only 27% of DJT’s total shares accessible to the general public.
Shares in Trump Media have surged over 110% since plunging to $22 per share following its massive IPO on Nasdaq, which initially traded at $66 per share. It’s worth noting that in October 2021, DWAC’s stock soared 357% in a single trading session, prompting multiple halts due to volatility.
Is There Still a GameStop and AMC-Style MOASS on the Horizon?
According to short-selling expert Ihor Dusaniwsky, “If $DJT starts rallying, you’re going to see the mother of all squeezes,” says the analyst from S3 Partners.
The term MOASS (mother of all short squeezes), popularized among retail investor communities, although somewhat subjective, denotes the magnitude of the movement that a short squeeze in DJT can cause.
The rally has, in fact, already begun, and according to graphical analysis, the signs suggest that the bullish trend is likely to continue for some time.
Technical indicators suggest that shares are heading back towards the IPO debut price. The crossing of the 50-day Simple Moving Average (SMA) above the 100 and 150 SMAs on April 24 suggests that the strength of the uptrend is increasing over multiple timeframes. Many traders and technical analysts view this pattern as a potential buy signal, indicating an opportune moment to enter long positions in the market.
If this is an indication of a strong short squeeze to come, it’s soon possible to draw some parallels with the massive short squeezes that occurred with meme stocks like GameStop (GME) and AMC Entertainment (AMC) in 2021.
Both traders and investors in GameStop and AMC were betting on the stock mostly aiming for a short squeeze rather than the business fundamentals’ strength.
However, unlike these two names, both have a much higher float than Trump Media.
And demand for shorting remains intense, as borrowing fees exceed 700%. This is a warning sign for short sellers who insist on playing with fire.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content)
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