What Are Meme Stocks? Plus, 5 Meme Stocks to Watch

Meme stocks aren’t running the world … or ruining it. But as traders in 2024, it’s important to know what they are and which ones are worth watching.

These stocks can make wild moves! Who knew that an army of Reddit traders could take out hedge funds? That’s exactly what we saw happen with GameStop (NYSE: GME). We’ve never seen that before.

I think it speaks to the power of the everyday trader. So meme stonks may seem like a joke to some, but I think those powerful moves are awe-inspiring.

You must be ready for it though…

So let’s break it all down. Read on to learn more about meme stocks, how to potentially trade them, and which I keep on my watchlist.

What Are Meme Stocks?

If you’re ‘old’ like me, you probably didn’t know what a “meme” was. And now there’s meme ‘stonks’?

So what are meme stocks?

The meaning of meme stocks is sort of self-explanatory: hyped stocks that perform well … But from a fundamental perspective, they shouldn’t do well at all.

Reddit forums and social media hype drive meme stocks. Speculators on Twitter and Reddit united together to trade their favorite companies in hopes of driving them “to the moon.” 

It may not be fair to call them speculators. These hype beasts want to buy and hold stocks of companies that might not have a great long-term outlook.

Brokerages like Robinhood helped level the playing field with apps and ‘easier’ access. That’s giving retail traders more opportunity. Robinhood traders can buy with just a few clicks on their smartphones and use partial positions to buy chunks of stocks.

And it’s helped create meme stock madness.

The craze took off in January this year when Reddit users noticed heavy short interest in Gamestop. The Reddit users took Gamestop from glorified penny stock to goliath in weeks.

Since then, more companies — and more Reddit traders — joined the mix.

Heavy shorting is often a characteristic of meme stocks. Traders who loathe big money and hedge funds discovered that they can pool their money together… 

That’s how they run the bigger money out of town. Or at least out of short positions.

New money flows into stocks, pushing them higher. In some cases, hedge funds are forced to cover short positions before losing billions of dollars. This is called a short squeeze.

There’d be no meme stocks without Reddit and WallStreetBets. A collective group like that can create serious damage…

Meme Stocks to Watch

Keep up with the crazy meme stock world and more — join me LIVE each morning at 8:30 Eastern for my Pre-Market Prep sessions. I’ll dig through the top news and stocks of the day to help you start your trading day.

And meme stocks often find a way to become relevant during the week … In day trades and swing trades, momentum is one of the key things we look for. That’s why it’s important to know about meme stocks and how they move.

I’ve discussed the importance of making watchlists at length, and this would be a good opportunity to start if you haven’t already. Make a meme stocks watchlist so you can be ready for the next big move. Odds are it will come in handy at some point!

A great way to help build your watchlists is to keep up with the news. With StocksToTrade’s Breaking News Chat, you’ll get the hottest market news that can supercharge stock moves. Grab your 14-day trial of STT + BNC today for just $17!

And, as a reminder, this is just a list of stocks to watch. Always do your own research. I’m sharing this list with you to help you understand all the factors you must consider. Remember to tailor your watchlist to your strategy. 

Now, let’s look at my list of meme stocks…

Meme Stock to Watch #1. AMC Entertainment Holdings Inc (NYSE: AMC) — The Meme Penny Stock All-Timer

My first meme stock pick is AMC Entertainment Holdings Inc (NYSE: AMC).

We’re in a HUGE meme-stock resurgence right now.

AMC is a prime example. It’s a legendary meme-stock runner from 2020 and 2021.

On Sunday, May 12, meme-stock trader, Keith Gill posted a cryptic image to X. The price spiked the next day, Monday, May 13, as a direct result.

I covered the whole story in this blog post.

You have to understand that a resurgence of one meme stock can affect the whole sector. AMC wasn’t the only meme stock to spike. It’s a huge sympathy play in the sector …

AMC passed $11 per share on May 14. It spiked 300% before pulling back.*

But back in 2021, AMC spiked past $60 …

(The yearly chart shows AMC spiked much higher because of a reduction in the total share count. It’s a ratio issue.)

There’s no telling how high the price could spike.

Wait for the chart to match one of the patterns within our trading framework. Trading without a plan is dangerous.

And traders who take a big loss on this HUGE trade opportunity will feel pretty silly … To say the least.

Meme Stock to Watch #2. GameStop Corp (NYSE: GME) — The Supernova Meme Stock With the Roaring Kitty Catalyst

My second meme stock pick is GameStop Corp (NYSE: GME).

You’ve probably heard about the GameStop spike in 2020 and 2021.

It was one of the most remarkable moves the market had seen in years.

In 2024 it’s happening all over again.

What is happening? Let me explain:

GME and AMC don’t deserve to spike +100%. These are horrible companies with horrible financials.

Because the stocks are crap, a lot of major Wall Street players were shorting them. It’s a good strategy: Short stocks that are crap and the price will probably drop.

There’s One Major Issue

If there are too many short sellers in a stock, the strategy can become overcrowded.

When some short sellers exit, they buy-to-cover, and the momentary bullish momentum can cause a domino effect of short sellers blowing up.

It looks like a massive stock spike that traders are banking off of. But in reality, it’s mostly short sellers blowing up. Except for a select few traders savvy enough to profit off the common price action. 

We knew GME was going to run after the Roaring Kitty social media post by Keith Gill. Again, I covered the whole thing in THIS blog post.

The spike got to 270%  before pulling back…*

And just like AMC, there’s no telling how high GME could spike.

It’s still below the highs from 2021 …

FOMO is a powerful emotion. Everyone who missed out on GME last time is likely itching to bank this time around.

It’s very possible the true GME spike is yet to come.

We’re tracking these meme stocks LIVE every day. Don’t risk your hard earned cash on a massive profit opportunity like this. Follow the process that we use to profit.

>> Join The Next Trading Live Stream <<

Take notes from professionals BEFORE you put your hard-earned capital at risk.

Meme Stock to Watch #3. Cyngn Inc (NASDAQ: CYN) — The AI-Powered Autonomous Vehicle Penny Stock

My third meme stock pick is Cyngn Inc (NASDAQ: CYN).

Artificial intelligence is still one of the hottest sectors in the market.

• Meme stocks are hot because of the hype.
• AI stocks are hot because the sector actually adds value to the market.

On May 16, CYN announced it significantly scaled up the business’ efforts to create an autonomous driving solution.

The stock spiked 120% that day as a direct result. And currently, the price shows signs of consolidation.

Stocks that move sideways after a volatile spike CAN spike higher.

Make sure you have a good understanding of support and resistance lines!

These are the levels that a stock uses to move sideways. And they can give us hints about profitable setups.

See my video below:

We can build positions above support in hopes that the price will break through upper resistance.

Meme Stock to Watch #4. Faraday Future Intelligent Electric Inc (NASDAQ: FFIE) — The 7,000% Meme Stock Winner

My fourth meme stock pick is Faraday Future Intelligent Electric Inc (NASDAQ: FFIE).

FFIE broke out by over 7,000% over the week.*

I shouldn’t have to say this — but that’s a HUGE number. What’s more, it’s one of the only meme runners of the past week that’s held onto most of its gains.

After its tremendous spike, it’s pulled back. That’s a good thing for traders.

A pullback is a sign of consolidation. FFIE could be setting up for another run. That’s why it leads my weekly watchlist this week:

Again, don’t trade these stocks randomly. That’s a good way to lose.

Instead, wait for a solid setup and make an entry based on a well-constructed trading plan.

Meme Stock to Watch #5. Aeye Inc (NASDAQ: LIDR) — The Hot Sector Technology Stock With a New Deal

My fifth meme stock pick is Aeye Inc (NASDAQ: LIDR).

This company announced a new partnership with LITEON on May 9 during after hours. The agreement will give LIDR an increased customer channel and a business partnership capable of growing its industrialization of autonomous vehicles.

The next day, on May 10, stock prices started to spike. The move currently measures over 280%. And the price is consolidating, it’s a hint that it could continue higher.

Another important factor to note is the stock’s float.

The float shows the total number of shares available for traders to buy and sell in the market. Anything below 10 million shares is regarded as a low float. It can also be thought of as a low supply.

Whenever there’s an asset with a low supply, the price can spike higher when demand increases.

The business partnership from May 9 acts as a catalyst that increases demand for the stock. And the low float can help the price spike higher.

 

*Past performance does not indicate future results

 

Get My Watchlist Every Week

Want the most watch-worthy stocks for the week ahead delivered to you at no cost every Sunday? Sign up for my weekly watchlist here! 

I send you the top five stocks on my radar. I use my StocksToTrade scans to spot tickers with the potential to make big moves for the week. It’s all to help you prep for the week and learn to spot the right stocks for your strategy.

Conclusion

That’s a wrap on my five top meme stocks to watch. It sure has been a fun ride this year, watching stocks that have NO BUSINESS doing well run to the moon.

Some people hate it. I understand that. It’s easier for retail traders to be active in the market now. That means more shenanigans in the market.

Meme stocks may soon fade forever … or they may never die. Either way, more money in the market is a good thing for every prepared trader. That means more opportunities to make money!

Many of these stocks will come and go, but some will stick around for the long haul. GameStop and AMC have stuck around far longer than many of us anticipated. I know I’ll be watching to see which stocks join them next…

What’s your experience trading meme stocks? What do you think of the show? Let me know with a comment below!

Meme Stock FAQs

What Are Meme Stocks and How Do They Differ From Traditional Stocks?

Meme stocks are shares of companies that gain popularity due to social sentiment and online discussions rather than their financial fundamentals. These stocks often experience a stock frenzy driven by retail investors on platforms like investment subreddits. Unlike blue-chip stocks, meme stocks’ prices can be highly volatile and influenced by social media trends and collective actions of meme-stock investors.

How Do Retail Investors Influence Meme Stocks?

Retail investors play a significant role in driving the stock craze around meme stocks. Through commission-free trading platforms and social media, they can quickly mobilize and create a stock rally. This collective action can lead to sharp increases in share prices over a short period of time, often detached from the company’s financial health or business model.

What Are Some Popular Meme Stocks and Their Impact?

Popular meme stocks include companies like AMC Entertainment Holdings, Inc., and GameStop Corporation, which have seen dramatic price movements fueled by retail trading. These stocks often attract attention due to their significant trading volume and the viral nature of online discussions. The initial meme stock craze highlighted how social sentiment could drastically impact market prices and trading strategies.

Why Is Social Sentiment Crucial for Meme Stocks?

Social sentiment is crucial for meme stocks as it drives investor behavior and stock prices. Platforms like Twitter, Reddit, and Truth Social facilitate the rapid spread of investment ideas and views, influencing the stock market. Companies like Trump Media & Technology Group have also been impacted by social sentiment, showing the power of collective online discussions.

What Role Do Institutional Investors and Advisory Firms Play in Meme Stocks?

Institutional investors and advisory firms like hedge firms and Bradley, Foster & Sargent typically approach meme stocks with caution due to their volatility and reliance on social sentiment. These firms analyze company fundamentals and financial attributes before investing, contrasting with the rapid, sentiment-driven actions of meme-stock investors. Their involvement can stabilize or further drive the market frenzy, depending on their investment strategy.

How Do Brokerage Services and Financial Advisors Approach Meme Stocks?

Brokerage services and financial advisors help clients navigate the complexities of meme stocks by providing insights into investment risk and strategy. Firms like SoFi Invest and SoFi Wealth LLC offer advisory services that consider both the potential high returns and significant risks associated with meme stocks. Financial advisors guide investors on balancing their portfolios and understanding the long-term implications of investing in such volatile assets.

What Are the Financial Fundamentals of Meme Stocks?

While meme stocks gain popularity based on social sentiment, their financial fundamentals often tell a different story. Analyzing key figures like shares outstanding, trading volume, and financial statements can provide a clearer picture of a company’s actual performance. This contrasts with the market price driven by online hype, helping investors make more informed decisions.

How Do Investment Vehicles Like ETFs and Mutual Funds Handle Meme Stocks?

Exchange-traded funds (ETFs) and mutual funds typically include a diverse range of assets to mitigate risk, but some may allocate a portion to meme stocks. Firms like Roundhill Investments might include popular meme stocks to capitalize on their high returns, balancing them with more stable investments. This strategy caters to investors looking for exposure to meme stocks without the full risk of individual stocks.

What Are the Long-term Implications of Investing in Meme Stocks?

Investing in meme stocks can offer high returns but comes with significant risk due to their volatility and reliance on social sentiment. Investment experts suggest that while meme stocks can be part of a diversified portfolio, relying heavily on them can lead to substantial losses. Investors should consider their investment objectives and strategy, focusing on long-term financial health rather than short-term gains.

How Do Market Conditions Affect Meme Stocks?

Market conditions, including broader economic trends and specific sector performance, can significantly impact meme stocks. For example, changes in currency exchange rates and the performance of industries like the energy sector or electric vehicles can influence meme stocks’ prices. Investors need to monitor these conditions to anticipate potential impacts on their meme stock investments.

What Are the Risks Associated With Meme Stocks?

Meme stocks come with high investment risk due to their volatility and susceptibility to rapid price changes driven by social media. Traditional investors and active traders alike must be cautious of these risks, understanding that meme stocks can experience significant losses as quickly as they gain. Using tools like robo-advisors and consulting with financial advisors can help mitigate these risks.

How Do Financial Markets and Stock Pools Influence Meme Stocks?

Financial markets and stock pools can amplify the effects of meme stocks by increasing liquidity and trading volume. These mechanisms allow for rapid buying and selling, which can lead to exaggerated price movements. Understanding how stock pools and market dynamics work can help investors navigate the complexities of meme stocks.

What Role Do Financial Publications Play in the Meme Stock Phenomenon?

Financial publications like the Wall Street Journal and Financial Times provide critical analysis and insights into the meme stock phenomenon. Their editorial policy often focuses on the financial health and underlying fundamentals of companies, offering a counterpoint to the social media-driven hype. Reading these publications helps investors make more informed decisions.

How Do Special Purpose Acquisition Companies (SPACs) Relate to Meme Stocks?

Special Purpose Acquisition Companies (SPACs) can become meme stocks when they merge with high-profile companies and attract significant social media attention. SPACs like Virgin Galactic have seen stock rallies due to their association with popular sectors and influential figures. Understanding the structure and purpose of SPACs is essential for investors interested in meme stocks.

What Are the Unique Characteristics of Meme-Stock Companies?

Meme-stock companies often have unique characteristics that make them attractive to retail investors. These include strong social media presence, recognizable brands, and the ability to generate significant public interest. Companies like GameStop and AMC Entertainment embody these traits, leading to their status as meme stocks.