There’s Blood (Battery Juice) in the Streets

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All hell broke loose on the New York Stock Exchange early Monday morning as traders slammed shares of Berkshire Hathaway, opting instead to gobble up GameStop calls as meme madness returned to the markets with a vengeance.

OK, that story’s not exactly true.

But you have to admit this would be one of the most hilarious (and irrational) market narratives of all time. Imagine investors cratering Uncle Warren’s Berkshire Hathaway by more than 99% to follow a massive GameStop squeeze. Insanity!

In reality, a glitch at the NYSE early Monday morning incorrectly showed Berkshire Hathaway and a few other high-profile stocks almost completely wiped out, which just so happened to occur right as shares of GameStop were halted for volatility following a Sunday night stunt courtesy of none other than Roaring Kitty — the GameStop trader who sparked the first meme stock rallies way back in 2020-2021.

This time around, Roaring Kitty posted a screenshot of his GameStop portfolio reportedly worth more than $100 million. Of course, it’s impossible to say whether the screenshot shows his actual holdings. But that didn’t stop the meme stock crew from pouncing on shares late Sunday night using Robinhood’s 24-hour trading feature.

By Monday morning’s premarket session, the stock had nearly doubled. But the momentum failed to carry beyond the first couple minutes of trade. GME opened above $40 and immediately started to sink. By midday, it was up “only” 30% — well off its early morning highs. It closed the trading day up only 21%.

These fast gains are impressive when viewed out of context. But if we dig a little deeper, we see a chart that’s turning into a complete mess. Not only is GME exhausted following the Sunday night pump, but it’s also reversed well below those mid-May highs that briefly shot the stock toward $65.

It’s beginning to look as if this echo bubble is already running out of juice. Less than a month ago, Roaring Kitty was able to send GME rocketing nearly 175% in just two trading days by posting a couple of memes on his Twitter/X account.

Now, he’s starting to look like the boy who cried wolf as GME shares fail to build on their weekend momentum. Don’t worry — he’ll book his profits (another screenshot posted Monday evening claims he’s still “all in”).

So, what about the folks who blindly followed his lead? I don’t think they’ll be too happy as they hang on for dear life this week…

The trouble with these emotional trades is that we all remember the huge move that catapulted GME to outrageous heights during the first meme stock days of early 2021. Fast forward more than three years, and you’ll find desperate traders would do anything to get another shot at those epic squeezes. But lightning rarely strikes twice. Instead, we’ll have to settle for these little echo booms and busts.

In fact, some of the other big tech rallies look like they could use a break as the calendar flips to June.

A few semiconductors not named NVDA are starting to get wobbly. We also had the Salesforce Inc. (CRM) earnings debacle that ripped through the entire industry on Friday and caused some serious intraday volatility in tech. All the cloud computing stocks took a hit, along with semis and mega-caps. And don’t even get me started on some of these stalled-out growth names. Cathie Wood’s ARK Innovation ETF (ARKK) rolled over in early April and never recovered. It’s now down 17% year-to-date…

Bottom line: With the hot summer vacation days quickly approaching and so many overextended stocks starting to settle down, it doesn’t feel like a great time to rally the retail trading troops behind a short squeeze.

Instead of playing meme-stock roulette, I’m more inclined to dig for fresh breakouts among the stocks and sectors that are flying under the radar right now.

Shining Light on Some Fresh Breakouts

A funny thing happens when a down-and-out stock starts to break out…

First, no one believes it. They assume the move is nothing but a dead cat bounce. The news hasn’t flipped yet, and everything you hear about the company/sector will be indifferent or bearish.

But as the breakouts expand, you’ll begin to hear some bullish whispers.

If the good vibes spread to the entire sector, those whispers will begin to attract more attention.

That’s exactly what’s starting to happen with solar stocks.

No one wanted anything to do with the solar names during the first quarter. The Invesco Solar ETF (TAN) was nearly chopped in half in 2023, and most of the most visible companies in the sector were limping into the new year at or near multi-year lows. Some of these stocks were still catching analyst downgrades as recently as January.

At the time, the reasons to avoid these stocks made total sense: prices were up, installations were down, and high interest rates were crushing demand.

But that was before First Solar Inc. (FLSR) broke out.

FSLR suddenly launched higher in mid-May, jumping above $200 for the first time in nine months and sparking a rally that would push shares up 40% in just two weeks.

All of a sudden, a stock no one wanted to own was quickly becoming one of the top momentum movers on the market…

You can probably guess what happened next…

The solar story quickly began to change. First, there was chatter about how Biden’s proposed China tariffs would offer a boost to the sector. Then, analysts began touting solar as an important piece of the artificial intelligence energy puzzle.

In fact, UBS just highlighted FSLR as “an overlooked, direct beneficiary of increasing AI-driven electricity demand.”

Now, we’re seeing other stocks in and around the sector beginning to firm up. And FLSR hasn’t given back a penny of its initial breakout, either. The stock continues to consolidate right at the top of its range, which just so happens to be in the neighborhood of its all-time highs from early 2008.

Turning to the ETF, we can see TAN has been building a base for almost a year. It’s now in the early stages of breaking out. And if FSLR is any indication, we’ll see new 52-week highs from TAN soon enough (we own calls over at The Trading Desk, by the way).

It’s still early in this solar narrative flip. If these stocks can power through the summer chop, we could be looking at a new leading momentum sector heading into the third quarter. Forget about the fizzling meme stocks — and don’t sleep on solar!

The post There’s Blood (Battery Juice) in the Streets appeared first on Daily Reckoning.

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