GameStop stock (GME) rose nearly 60% on Tuesday, fueling a meme-driven rally that sent the video game retailer's stock up 74% in the previous session.
Along with GameStop's rise, AMC (AMC) stock also soared. Shares in the theater chain operator rose about 30% after rising as much as 120% earlier Tuesday.
In an SEC filing, AMC said it issued about 72.5 million new shares last session, raising about $250 million.
Other heavily shorted stocks that rallied on Tuesday included SunPower (SPWR), which rose 63%. Beyond Meat (BYND) is up 25%, and Children's Place (PLCE) is up about 6%.
GameStop shares rose as much as 110% in the previous session following the re-emergence of Keith Gill, also known as “Roaring Kitty.” Keith Gill's bullish case against GameStop ignited a rally in meme stocks in 2021.
The stock had been flat since the start of the year before Monday's rally, but was up about 60% last month. GameStop stock is now up more than 180% from last month, excluding Tuesday's gains.
DataTrek Research co-founder Nicholas Colas said in a note to clients that this recent trading activity “feels like an echo of early 2021, when this account fueled GameStop's vicious short squeeze.” I wrote.
Collas noted that the move back in 2021 is much larger than what has been seen so far this time around, with GameStop stock gaining 1,500% in January 2021 before losing most of its gains.
But the pain endured by short sellers during the first meme stock rally three years ago hasn't deterred them from betting on these companies.
Short interest in GameStop has continued to rise since the meme rally and stands at nearly 24% of the float, according to data from S3 Partners.
GameStop shorts fell by $1.36 billion on Tuesday after losing almost $900 million on Monday.
“With the resurgence of meme trading, we are seeing continued squeeze-related short covering.” Ihor Dusanivsky saidManaging Director of S3 Partners.
In Colas' view, traders who use this type of aggressive approach to short rising stocks have only one option: “to close out their positions, regardless of the price.”
“In the case of GME, we are also concerned that retail traders could be tempted by a repeat of 2021,” Colas added.
The meme craze three years ago gained national attention and attracted many retailers during the pandemic lockdown.
“I don't see this situation at all like 2021, which has been an almost transformative moment that has dragged tens of millions of people into the market,” said CEO of Options & Tasting Live. , said Tom Sosnoff. Futures trading platform.
Still, YouTuber Matt Koze, who has held positions at GameStop and AMC in the past, said the all-important “little guy vs. big guy” aspect of the 2021 short squeeze remains true to today's rally. He says it still applies.
“There is a perception that the entire system is set up and segregated to benefit powerful elites. GME is a symbol of a populist movement that opposes that notion,” Coase said.
“The only real change from a psychology perspective is that I'm no longer so internalized,” he added.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on Twitter @ines_ferre.
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