What happened
Shares of GameStop (GME 1.10%) are whipsawing Thursday on no company-specific news, but its fellow meme stock AMC Entertainment (AMC 2.75%) also roared ahead and then fell back.
GameStop stock was up 6.7% as of 2:36 p.m. ET after having been as much as 33% higher earlier in the session. The sharp movements in both directions triggered the New York Stock Exchange's "circuit breakers," temporarily halting the stock's trading.
Image source: Getty Images.
So what
Volatility has been the name of the game with meme stocks practically since the concept got a name last year. Meteoric rises and dramatic declines are among the defining features of this subset of stocks. However, they have remained at elevated valuation levels and maintain high short-interest ratios.
In fact, it was short-sellers who likely were the most impacted by Thursday's sudden move higher. Short interest in GameStop, though down slightly from where it stood one month ago, still stands at 21% of its float. AMC Entertainment has a similarly high percentage of short interest.
Those sharp spikes could have triggered calls for short sellers to cover their positions. That could have led to short squeeze situations, though their quick runs back down might have mitigated the impact.
Now what
GameStop stock has seen such sharp gains before, only to also watch them evaporate within days. The video game stock may become even more volatile as it is due to report earnings next month.
Even so, the retailer being able to maintain a gain during a session when the Dow Jones Industrial Average were both S&P 500 down by about 1.8% is noteworthy since it is seemingly just enthusiasm among retail meme-stock traders keeping the share price propped up.
