Stock Bubble Warnings Include Gamestop and FFIE

For the third time since 2021, short-sellers had a chance to close their bet against GameStop (GME). Over the weekend, “Roaring Kitty,” posted his position on Reddit’s r/Superstonk. The subgroup crossed 1.013 million followers on Monday, compared to Wallstreetbets’s 15.62 million registered users. Amid growing stock bubble risks, the active user count in the two groups is the major differentiator.

Superstocks has 17.7k active users, compared to WSB’s 5.4k. Roaring Kitty posted the $210.6 million market value position on GME stock in the smaller group. This led to GME stock rising by 70% in pre-market trade on Monday. Shares closed up by 21% on the day.

Looking ahead, on June 11, GameStop will post quarterly results. Expect weak fundamentals to validate the short float of 25.49%.

As expected, loosely linked meme stocks like BlackBerry (BB) and AMC Entertainment (AMC) rose on the day. Their small rise indicates that the stock market sentiment is overly bullish. Weak business fundamentals are detached from bullish buying momentum. In the short term, sentiment wins but in the long term, broken businesses will eventually fail.

Faraday Future (FFIE) is another red flag that markets are too hot. 225.86 million shares exchanged hands, placing FFIE stock as the number two most actively traded stock.

Cautious investors should avoid all stocks mentioned in this article.

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