Gareth Soloway of InTheMoneyStocks.com explains what’s been happening with GameStop and what impact this activity could have moving forward.
Market activity has been interesting this week to say the least, with GameStop’s (NYSE:GME) massive share price rise attracting interest from investors and the general public.
The situation continues to develop quickly, but momentum was initially spurred by buying activity from retail investors on the Reddit forum WallStreetBets. Their attention has created major losses for Wall Street short sellers who had expected GameStop’s share price to fall.
“It’s really showing us that the power of social media is immense,” said Gareth Soloway, chief market strategist at InTheMoneyStocks.com. “When you have 3 or 4 million people, even if they’re just putting $1,000 or $2,000 in a stock, it can make it a meteoric rise in these stocks.”
There are major implications for this type of activity, said Soloway, especially with entities like Robinhood now starting to impose trading restrictions on GameStop and other companies that have been caught up in the WallStreetBets phenomenon — those include BlackBerry (TSX:BB,NYSE:BB), Bed Bath & Beyond (NASDAQ:BBBY) and Nokia (NYSE:NOK).
“I’m in the camp where the markets need to do what the markets do — and the markets will have winners and losers,” he said. “You have to let the markets do it, you can’t restrict people.”
Soloway believes that this type of trading activity is a sign that the market is topping out, and noted that the US Federal Reserve has played a key role in bringing it to this point.
“When history looks back at this period of time, they are going to say, ‘What was the root cause of these speculative bubbles?’ And the answer is the Federal Reserve. There is no doubt that the Federal Reserve — the easy money policy, interest rates at zero, meaning that everyone has to go searching for yield, which is in stocks — it creates these asset bubbles,” he said.
Soloway also spoke about the connection between GameStop’s market activity and silver, which some WallStreetBets members now appear to be looking at as another potential short squeeze opportunity.
“There’s some big short positions in silver out there, and I think they’re trying to ignite that same short squeeze … (but) there’s a big difference between the market cap of silver, which is massive, compared to a stock like GameStop, which when it started was only a billion dollar company,” he said.
Watch the video for more from Soloway on GameStop and the implications of its recent trading activity.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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