WEN Meme Stocks Are Great Trade Opportunities

Most of the time we focus on low price day trades. Quick in and outs.

Today I want to focus on a real company getting a lot of attention as the latest meme stock. Now, the most important thing about meme “stonks,” as they call ‘em, is to understand the reason for the move.

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The Big Picture

The Wendy’s Company (NASDAQ: WEN) has problems. If you look at the long-term chart, it’s a mess. Nonstop lows, lows, lows…

Wendy’s hit a 52-week low three days ago (June 23). It looked like it was going to zero.

What happened over the last couple of days is, funny enough, r/WallStreetBets. The Reddit stock trading community that refers to its members as degenerates, apes, and autists decided to pile into WEN and “save” it.

Now, you can joke about it. But WallStreetBets was behind the GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings, Inc. (NYSE: AMC) squeezes back in 2021.

Going back to WEN, it was heavily shorted because of the long-term downtrending chart.

The thesis is no different to GME or AMC during COVID. All these meme stocks were companies that were going out of business.

The collective, meaning the internet, recognized they were heavily shorted and started pushing them around.

Now, If you don’t like the “why” for the trade, you don’t have to trade it. So, if you’re saying to yourself, “Man, I’m not going to trade some Reddit pump with a bunch of crazy people like Roarking Kitty” then steer clear.

But we’ve had recent examples with great trade opportunities:

• Smartbird Inc. (NASDAQ: BIRD) soared from $1.83 to $17.97 (+881%) in April
• Beyond Meat Inc. (NASDAQ: BYND) also squeezed from $0.60 to $1.40 (+133%) in April.

For context, BYND is all the way back down to $0.70 and BIRD is in the low $4s.

So, we know how these end up. They’re not long-term trades. They’re momentum plays based on the battle between big short sellers and the r/WallStreetBets degenerates.

Now, that could be as a day trade or a swing trade, depending on how they play out. Notice what happened with WEN in the morning session yesterday:

Can the r/WallStreetBets apes still squeeze WEN? Time will tell. For now, the shorts look to be back in control.

So, how do you trade meme stocks without getting caught up in the mess?

My Take

Again, the first step is to know the why. Then, make a trade plan and stick to it. Before you place an order, know your entry, target, and stop loss. Had I traded WEN, I would’ve waited for it to hit the Oracle signal, and stopped out when it failed. Simple as that. Cut and move on to the next.

That said, meme stocks can create solid trade opportunities as long as you don’t buy into the “to the moon” narrative.

There’s a quote you should memorize:

“A trend, once established, is more likely to continue than it is to reverse.”

The idea comes from Dow Theory, but I read it in “Technical Analysis Using Multiple Time Frames” by Brian Shannon. I highly recommend that book.

Watchlist

Triller Group Inc. (NASDAQ: ILLR) did a 1-for-10 reverse split on June 23. Companies do this to stay listed because the Nasdaq has a $1 per share minimum bid.

Yesterday (June 25), the company announced that it bought SpaceX (NASDAQ: SPCX) shares “to be held as a strategic treasury asset on the Company’s balance sheet.”

ILLR ran +597% in 90 minutes on the news:

Later, the company issued another press release titled: “The Reverse Split Is Not the Story.”

There really is nothing new under the sun. The company is doing what sketchy penny stock companies do.

Now, one thing I’d like to point out is that ILLR was a Rubicon Cross play, with an entry at $1 per share:

We had members absolutely CRUSH it with this stock:

You can learn more about my Rubicon Trading System here.

On My Radar

• Is this finally the end of the memory chip boom and bust cycle? I’m bullish.
• This is why I’m bullish on memory. Good thing I already bought my new laptop.
• I called BlackBerry Limited (NYSE: BB) on my June 5 appearance on Schwab Network.
• Yesterday, BB surged 20% on positive earnings.