The market is heating up once again, and investors are saying, “RISK ON!”
Over the last three weeks, the S&P 500 is up nearly 10%. The Russell 2000 is higher by 7%. And the Nasdaq 100 is up an impressive 14%.
I told you last week that I started to make bigger buys in mid-March.
And it seems that many other market participants are doing the same.
In fact, we’re seeing traders and investors go all-in on some of the same stocks that got crushed over the past year.
First, “meme stocks” are back…
GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC) have both made huge moves off their recent lows.
From the 2021 high to the 2022 low, GME fell 84%. But in the last two weeks, the stock is up over 96%!
It’s a similar story for AMC, which dropped 82% from its 2021 high to its recent low three weeks ago.
Over the last three weeks, however, the stock is up a massive 92%.
Both stocks were up even more earlier in the week before they started to cool off.
So, it appears the “apes” at Wall Street Bets are going in heavy, causing such a large upswing that trading was halted intraday on Tuesday.
While GME has even crossed back above its 200-day moving average, I don’t see a good entry point yet on either.
Still, I’m keeping an eye on both, and I’ll let you know if an opportunity develops.
“Pot stocks” are also going wild following the relentless selling they’ve endured over the past few years.
The catalyst for the renewed buying is a marijuana legalization bill that is expected to be passed in the United States House of Representatives.
The Marijuana Opportunity Reinvestment and Expungement (MORE) Act would decriminalize cannabis at the federal level.
Traders are latching onto this story, and cannabis stocks are soaring once again.
Big name companies like Tilray Brands, Inc. (TLRY) and Sundial Growers Inc. (SNDL) are booming.
And micro-cap growers like Medical Marijuana, Inc. (MJNA) are also seeing big swings higher.
Most of these stocks are still more than 80% off their highs made in early 2021.
TLRY, for example, is off 87% from the 2021 high and down an almost unbelievable 97% from its 2018 peak.
Could this be the beginning of a major move higher? It’s possible.
Remember the Stock Cycle
This is a good time to bring up the four stages of the stock cycle again.
I might sound like a broken record, but it’s worth repeating.
The four stages of the stock cycle, an idea originally pioneered by legendary trader Richard Wyckoff, is made up of four distinct stages…
- Stage 1: Consolidation
- Stage 2: Accumulation
- Stage 3: Distribution
- Stage 4: Capitulation
To me, it seems like most of the stocks we’ve talked about above have made it through Stage 4.
They’ve fallen dramatically from their highs and are beginning to enter Stage 1 again.
Before we jump in, however, we’re going to need to see a longer period of consolidation take place.
I suggest keeping a close eye on this sector. But don’t get impatient.
When they make their way into Stage 2 — the most profitable stage of the stock cycle — that’s when we’ll look to get involved in a more meaningful way.
Embrace the surge,
Ross GivensEditor, Stock Surge Daily