3 Reddit Favorites On My Radar

Hey Traders,

The retail crowd has certainly not lost interest in trying to provoke short squeezes, and “stick it to the man” (“the man”  in this case being hedge funds and other institutional traders) …

While combing through WallStreetBets is more likely to give you a migraine than a viable trade idea, it doesn’t mean there are no good meme stock trades to be had … it just takes a little work (no, interpreting ‘stonks talk’ on a Reddit forum doesn’t count as ‘work’) to separate the good from the bad.

But – it can be totally worth your time, as playing meme stocks can be hugely profitable … if you know what you’re doing.

Here’s three meme stocks I’m watching (and playing!).

Palantir Technologies (Ticker: PLTR)

“Big Data” software company Palantir Technologies (Ticker: PLTR) has been a frequently-mentioned name among Reddit traders for a while now, and I’ve also been keeping an eye on the Wall Street rookie, who made its market debut just last October.

A recent partnership with vehicle data company Wejo has put Palantir in the spotlight once again, and trading activity looks to be picking up over the last several days.

Friday we saw the shares temporarily break through the $29 mark, and the stock could very well continue to surge higher.

PLTR recently bounced off its 200-day moving average, and I think a bullish momentum play may make sense on this stock. 

Chart courtesy StockCharts

In fact, I recently purchased October calls in my Robinhood Trader program – you can see the trade details here.

With PLTR’s 30-day at-the-money implied volatility (ATM IV) in just the ninth percentile of its annual range, it’s a surprisingly good time to buy options on this meme stock, as options traders are pricing in low IV, relative to what we’ve seen in the last 12 months.

And if you read my recent primer on using vol to pick options, here’s a little something to help you understand why I like the standard October expiration term (Oct15):

Clover Health Investments (Ticker: CLOV)

Clover Health Investments (Ticker: CLOV) saw a huge blast-off in early June, but the shares have slowly given back pretty much all of their meme-fuelled gains in the months since, and CLOV is currently battling it out with its 50-day moving average.

Chart courtesy StockCharts

Wall Street seems to be largely holding a bearish sentiment towards CLOV, so it isn’t out of the question we could see more short sellers creep into the stock – although with 15% of its float already sold short, we don’t necessarily need to see a big influx of short sellers to see a short squeeze.

With Reddit still on the prowl for a CLOV short squeeze, I think there could be real upside in store. The stock is looking similar to fellow meme stocks Support.com (Ticker: SPRT) and Vinco Ventures (Ticker: BBIG) before their short squeezes last month. If the borrow rate goes up further, I think these shares could run as high as $20.

AMC Entertainment (Ticker: AMC)

AMC Entertainment (Ticker: AMC) is, of course, one of the original meme stocks … and for as many times as I’ve expected it to finally fade away, it continues to chug along.

Chart courtesy StockCharts

The stock is still considered hard to borrow (HTB) – so there is high demand and low supply, which is helping AMC hold onto its upside. 

With the shares already fading after their most recent pop higher, I think AMC will continue to drag down – I’m anticipating a drop to the $40 mark (or even lower).

Though AMC currently has a relatively low 30-day ATM IV, the options I am interested in are still a bit too expensive for my liking. For example, 40-strike puts are priced over $3.00 – that requires a move down to $37 to even start to be in the money, and I’m not liking the risk/reward ratio considering the price to get in the trade.

However, I will be continuing to watch this stock, as I think there will eventually be some significant downside to be had – I just don’t want to pay too much for it right now.

Remember, these are volatile meme stocks; proceed with caution. Always have a trade plan, and practice strict money management guidelines when trading.

Your Only Option,

Mark Sebastian

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