Meme Stock Surge: Is There a Strategy Behind the Hype? [Learn Premium Weekly Review]

On Wednesday, May 15, the U.S. released its latest CPI data, which had garnered significant market attention. In Q1 this year, the rising CPI dampened hopes for substantial rate cuts, so the market eagerly awaited signs of easing inflation.

The April data met market expectations: CPI growth slowed, with a year-over-year increase of 3.4%, down slightly from 3.5%, and core CPI rising 3.6% year-over-year, below the previous 3.8%, marking the lowest increase since April 2021. The month-over-month core CPI growth fell to 0.3% from March's 0.4%, the first decrease in six months.

This data somewhat fueled market enthusiasm for Fed rate cuts. Investors increased bets on a rate cut in September, with swap contracts on Wednesday pricing in an over 80% probability of a 25 basis point cut by the Fed in September.

However, despite inflation indicators beginning to align with Fed officials' considerations for rate cuts, they will likely want to see more data, possibly at least two more declining CPI reports. As Fed Chair Powell mentioned in his speech on Tuesday, the Fed needs to be patient. On Thursday, Fed Governor and New York Fed President Williams echoed this sentiment, noting that while the overall April CPI trend was positive, it wasn't enough to prompt an imminent rate cut.


Meme Stock Boom: Can You Navigate the Hype Strategically?

If investors wish to participate, remember these key points:

Position Control: Always manage your position size. Approach each trade with the mindset that you could lose your entire investment, and decide accordingly how much you’re willing to risk.

Quick In and Out: Meme stock rallies always come to an end, but no one knows when. Avoid being the last one out. Execute quick trades to avoid getting stuck at the peak.

Stop-Loss and Take-Profit: Implement strict risk management for each trade. Set clear stop-loss and take-profit levels. Consider using trailing stop orders to limit potential losses while locking in profits. However, be aware that meme stocks often experience circuit breakers due to high volatility, which might cause you to miss your stop-loss price.

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