How To Spot The Next Meme Stock

[image] Hello trader, Earlier today the Financial Times published a piece titled: US hedge funds suffer as meme stocks rally again It went on to mention: Losses for Melvin and Light Street total about $6bn since the start of May, Melvin, the highest-profile casualty of the first meme stock rally in January, lost another 4 per cent in May, said people familiar with the numbers. What does that mean for us as traders? Narratives matter. And right now the narrative dominating the market is Reddit traders are attacking funds who have positions in highly shorted stocks. So how can we see the opportunity of this recent phenomenon? First and foremost, Reddit is a public forum. That means everything shared on the platform is readily available. However, going through and reading every post can be tedious. That’s why it is helpful to use a tool that tracks engagement. [One site I like is this one.]( It tracks the most mentioned: [image] Puts/Calls Mention Ratio: [image] As well as a whole slew of other metrics… [image] Once you have a foothold of what is being discussed you then try to follow the money. What I mean by that, is look to see where the most actively traded options are. - Pay attention to the strike price (ATM or OTM) - The expiration period - Volume vs. Open Interest To name a few… You can fork over some dough to get this data...but most trading platforms offer it for free as well. For example, today we’ve seen a ton of action in Sensonics Holdings (SENS). Here’s what was pulled up on it using ThinkorSwim: [image] [image] I prefer something more detailed, like the Dollar Ace scanner… [image] But whatever you decide to use, make sure you’re tracking the comments and the options flow. This playbook has been working, but who knows when it will end. 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