Many of the most-trusted technical indicators suggest the stock market is seriously overvalued. And when it is, you have to be careful about what you’re investing in. But with stocks in record territory, investors are looking anywhere and everywhere to find the next big winner.
The result? Irrational exuberance on social media sites have sent the share prices of some stocks into the stratosphere. But the fear of missing out and not understanding the basics about trading means a lot of investors are going to be licking their wounds and wondering why they lost so much money.
Why Did GameStop and BlackBerry Shares Soar So High?
There are a few reasons why stocks climb higher: investor optimism, company news, financial results, and even positive economic data.
None of those factors play into why shares of GameStop Corp. (NYSE:GME), BlackBerry Ltd (NYSE:BB, TSE:BB), Express, Inc. (NYSE:EXPR) and BB Liquidating Inc (OTCBB:BLIAQ), which is the remnant of bankrupt video rental company Blockbuster, have ripped higher.
Instead, amateur day-traders pumping stocks on social media sites with unsubstantiated rumours have turned trading into gambling. It’s made a handful of day traders rich but left the vast majority of investors substantially poorer.
On Wednesday, January 27, a day when the broader markets were deep in the red, GameStop stock hit a record high of $380.00, for a year-to-date gain of 1,900%.
On that same day, shares of BlackBerry hit a 10-year high of $36.00; up 323% in 2021. Interestingly, an analyst at Scotiabank (NYSE:BNS, TSE:BNS) issued a Sell rating on BlackBerry on Wednesday with a price target of $10.82.
Even overlooked penny stocks were getting the pump and dump treatment from day-traders on social media platforms. Express Inc hit an intra-day high of $13.97, a four-week gain of 1402%. And bankrupt Blockbuster also got in on the action, hitting an intra-day high of $0.20. It entered 2021 trading at $0.0033—that represents a short-term gain of 5960%!
Admittedly, the Blockbuster trade might have been a case of mistaken identity. Blockbuster filed for bankruptcy in 2010; BB Liquidating Inc is Blockbuster’s liquidation holding company. BlackBerry trades on the NYSE and TSX under the symbol BB.
Even still, this shows why it’s so important to actually understand the company you’re investing in and basics like what a stock ticker is. You probably shouldn’t be trading if those two factors are a foreign concept.
By mid-day Thursday, January 28, virtually all of those stocks had given up massive gains. But were still trading at eyewatering valuations. GameStop was down 44% at $196.15, BlackBerry was 48% in the red at $19.51, Express Inc had slipped 57% to $4.05 and BB Liquidation was down 65% at $0.069.
Investing can be exciting but the fear of missing out has resulted in a lot of inexperienced investors being controlled by their emotions and jumping into stocks they are entirely unfamiliar with. By the looks of things, some investors are also buying shares in stocks that have a similar sounding name or ticker.
Doing your due diligence and knowing how to evaluate a stock’s technicals and fundamentals might not sound fun, but it can help you come up with a reasonable valuation, which helps you determine which ones are the winners and which ones you should avoid.
Learn-To-Trade.com, Canada’s Leader in Stock Market Trading Courses
The recent run-up in certain stocks, hyped by amateur day traders on unregulated social media platforms, shows why it’s imperative that investors understand what they’re trading in and why. And that’s exactly what you’ll learn from the expert traders at Learn-to-Trade.com.
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At Learn-To-Trade.com, we understand that investors have different needs. That’s why we provide a unique, Lifetime Membership that allows you to re-attend any part of the comprehensive program as often as you’d like.
To learn more about Learn-To-Trade.com’s stock market trading course, contact us at 416-510-5560 or by e-mail at info@learn-to-trade.com.
