Well, that didn’t take long.
Gamestop Corp Daily Chart
As usual, the market loves symmetry. Something that races up like a rocket will come crashing down like a rocket. And that’s exactly what happened to GME this week.
As my dad always reminded me every time I screwed up, “Easy come easy go.” (Thanks, dad.)
The fact GameStop (NYSE:GME) crashed isn’t a surprise. To me, the only surprise was just how absurdly high this got before it crashed. I know the market loves taking things to extremes and I have seen a lot of crazy things in my time, but this 10,000% move over several weeks creates an entirely new category of insane.
That said, this ending was inevitable.
Seven days ago in my free blog post, I wrote the following to all of the new Reddit millionaires out there:
The problem is when these people are sitting on a mountain of profits, rather than thank their lucky stars and locking-in these once-in-a-lifetime profits, they are too busy gloating and taunting the other side. Instead of being satisfied with nearly $500, bulls insist on waiting until this goes all the way to $1,000 or even $5,000.
Well, with GME down nearly 90% since last week’s intraday highs, most of those Reddit millionaires are now Reddit thousandaires. At least the lucky ones are still thousandaires. Others have a whole lot of explaining to do when their wives discover the down payment for a house has gone missing.
For those that still have money left in the market, there is no reason to ride this all the way into the dirt. Cash in what you have left, learn from this lesson, and come back to the market better prepared next time.
Experience is the name we give our mistakes. Everyone who traded GME over the last two weeks got several years’ worth of experience in just a handful of days. Take these lessons and grow from them.
As for what comes next, GME will be insanely volatile for weeks and even months. That means 50% and 100% moves in both directions. But at this point, a 50% bounce only gets us back to $75. Maybe we get back to $100 or even $125, but waiting for anything higher is just wishful thinking.
For everyone that was introduced to the stock market because of GME, while it didn’t turn out the way people had hoped, use this opportunity to learn more about the stock market. For many of us, this has turned into a lifelong adventure.
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