Trade Meme Stocks: ContextLogic (WISH) is a Doozy
Even stocks have apparently taken control of the entire stock market. If you don’t believe it, you might agree that they have at least become the main talking points.
Every day we see more and more stocks joining the list. What started out as a short-lived game on GameStop (GME) – Get a report and AMC Entertainment (AMC) – Get a report a few months ago has turned into a whole new ball game.
After these actions started to gain momentum, TheStreet’s Jim Cramer told readers that Beyond Meat (PARND) – Get a report would be next – and it was.
ContextLogic has been all over the map lately. At Monday’s low, the stock was trading at $ 7.52. At Wednesday’s high, shares hit $ 15. In other words, the shares were within pennies of doubling in just a few days.
The action is beyond nature and a growing list of traders is frustrated with this price action. Many say it is akin to a circus act – an embarrassment in the markets.
ContextLogic rose over 30% at one point on Wednesday, but stocks are now down around 5%. Here’s what to watch out for if you dare to trade a speculative doozy like this.
Logical trading context
On Monday, ContextLogic flirted with a major outage below $ 7.50. This area has been strongly supported over the past month as the stock has come under considerable pressure. Keep in mind that this stock was north of $ 30 earlier this year.
We’ve seen a painful bear market sweep away growth stocks and SPACs, and it hasn’t spared ContextLogic stocks.
However, on Tuesday we saw a massive spike as the ‘memes trade’ took hold. ContextLogic shares broke the 10 and 21 day moving averages. Despite the flirtation with a breakdown below $ 7.50, the shares quickly hit $ 10 and closed north of $ 11.50.
Although ContextLogic was preparing for a scorching rally, it encountered resistance from the 50-day moving average and resistance to the downside (blue line). At least temporarily.
Stocks deepened on Wednesday, but again, they did until resistance. This time, resistance was near the $ 15 mark. We have since seen a return to the 50-day moving average.
Today, investors are in a difficult situation. The stock is wobbly, but still has “same potential”.
If stocks close below the 50-day moving average, a test of the 10-day moving average could be next. A close above 50 days keeps $ 15 in play. Above $ 15.50 and the 21 week moving average is a possible bullish target.