What a day for GameStop and the many members of both its retail and institutional supporters. Coming off a bad week with below expected earnings GME was down bad to a low of $77.58 but those who religiously follow r/GME still believe that the MOASS (MOTHER OF ALL SHORT SQUEEZES) is upon us and is not a matter of if, but when. Today the price of GME hit $140 after markets closed. So, what happen today that has led to a +40% gain in $GME stock? From the perspective of the retail its hard to exactly pin point todays price action but there are clues for those who are out looking.
A big indicator this morning that it was about to hit the fan was looking at the borrow interest rate. This is the fee that brokers charge funds that choose to short to hold on to those barrowed shares. By increasing this fee it seems to have forced shorts to cover which led to the face melting we witnessed today.
Interestingly the legacy media has been very quite about these events today but was all over last weeks down trend. But it is no secret that the funds with the most to lose here back that same media conglomerate. What is to come of all of this is really up to anyone’s best guess. Yes, GME’s fundamentals might be absurd and it’s metaverse market place business model could be a crack dream but for whatever reason the price action of this stock just wont die. Because of this resilience it must be noted that something major is going on here. The type of price action we are seeing here is COMPLETELY abnormal and it seems to be posing a major threat to hedge funds that are finding themselves on the wrong side of this trade.
As we continue to watch this saga unfold something very interesting to watch is the utilization rate of GME stock. The utilization rate is the number of loaned shares DIVIDED by the total number of shares markets have to lend.
GME’S UTILIZATION RATE IS CLOSE TO 90% MEANING THE NUMBER OF SHARES AVAIBLE FOR SHORTS TO BORROW TO TRY AND DRIVE THE PRICE DOWN IS CLOSER TO ZERO.
This is important because the last time GME’s utilization rate was at these levels it squeezed to +$400. Looking at this it explains the raise in barrowing fees due to the supply and demand of shares available on the open market.
While a lot of GME is speculation there is no question that CEO of GameStop Ryan Cohen really believes in the long term out look of the company. It was confirmed today through SEC filings that he bought another 100,000 GME shares during the rip up.
I put my money where my mouth is
— Ryan Cohen (@ryancohen) March 22, 2022
So are meme stocks back?! It sure feels like it.
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