The end of a stock market bubble is often accompanied by a speculative boom in many stocks, which often rise to extreme and unbelievable prices, only to be followed by an immediate collapse when the bubble bursts. This phenomenon is especially evident in tesla and GameStop, which have become a speculator’s paradise with their roller coaster rises and falls.
Tesla, a major U.S. electric car manufacturer, was recognized as the most swiftly rising U.S. technology stock last year, soaring sevenfold in one year and reaching a sky-high price of $880 on January 8 this year, but falling to $563 two months later on March 8, a 36% drop in the band, with the same staggering rate of decline as increase.
On the occasion of many people thought Tesla this file stock rally has ended, Tesla on Tuesday (March 9) and suddenly surged 19.64% to close at $673, became the focus of market attention.
Tesla shares, although unusually lively, but there are long-term valuation too high doubts, the current cost-benefit ratio of more than 1,000 times, much higher than the S&P index near 24 times, even the sharp rise in recent years, although the Amazon cost-benefit ratio of up to 73 times, but also difficult to look behind.
Long-term over-valuation, in the eyes of short sellers is a huge bubble and potential profit opportunities. According to statistics, Tesla is currently shorting 31.38 million shares, equivalent to a market value of $10.9 billion, accounting for 24% of Tesla’s total issued shares, becoming the highest percentage of shorted stocks in the United States.
Another speculative spike in GameStop, one of the nation’s largest brick-and-mortar video game stores, was by far the most swiftly speculative stock in 2021, soaring from near $19 at the beginning of the year to $380 at the end of January, up 19 times in just one month, making it the most high-profile short-rolling masterpiece in U.S. stock history and known as a major victory for retail investors against the shorting Wall Street establishment.
The stock quickly collapsed after rising to $380, falling to a low of around $40 on February 18, with a swing decline of nearly 90%, leaving retail holders in tears. However, the stock did not fall off, soaring 26% to close at $280 on Tuesday, a swing gain of another six times.
Like Tesla, GameStop, which is still operating at a loss, is also a company of particular interest to short sellers, with about 16 percent of the total shares outstanding. In January, the stock had a total short interest market value of $12 billion and is currently trading at about $1.6 billion.
Tesla and GameStop’s surge on Tuesday, paired with bitcoin’s 6% jump to near $55,000, sparked buying in a low-grade sweep of tech stocks that had plunged in the last four weeks, with the Nasdaq rising 3.69% on Tuesday, its biggest one-day gain in four months, pushing the S&P 500 up 1.4%. Unfortunately, the market has only one set of short term funds, investors frantically chasing technology stocks at the same Time, the Dow closed only a small gain of 0.1%.
U.S. stocks since last March’s trough surge, short positions have repeatedly defeated, but in recent weeks short positions began to show a profitable turnaround. So far in 2021, shorts have made $4.2 billion in profit-taking at Tesla and also made more than $1 billion in short-selling profits at remote video software provider Zoom and Apple, respectively, according to financial analysis firm Ortex.
Tuesday’s strong rally in technology stocks, in addition to falling deep to attract buying factors, there are other timing and location to match. After recently touching 1.61%, the U.S. 10-year bond yield has slipped to 1.528% in its latest offer. Secondly, the dollar index has slipped below 92.5 in the latest quotes after surging to 92.5. Both of these indicators’ recent upticks are inverse indicators for technology stocks or U.S. stocks, which have been the main cause of the stock market’s decline over the past three weeks.
The biggest issue for investors now is to judge whether Tuesday’s surge in technology stocks is a sign of a bottom? Or is it a “dead cat jump” that will continue to fall after a deep rebound? As the rising trend of U.S. bonds and the dollar has just started, while technology stocks are up nearly a year after the fall, the battle between the two may have just begun.
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