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GameStop & ‘most shorted’ stocks go wild

USD/JPY – Daily Candlesticks
Source: GKFX / MT4 (January 25, 2020)

USD/JPY is consolidating in a down-sloping channel which could be part of a bullish flag pattern where the first pole begins at the January 5 low. The upside pattern projection using the length of the flag pole projected from the breakout is 105.50/60, nearly matching the November higher.
 

TAKEAWAYS


•    GameStop among other ‘most shorted’ stocks gyrate wildly in short squeeze
•    S&P500 flash crashes 60 points before rebounding
•    Chinese President Xi makes statement to remote World Economic Forum
•    Ether hits record high
•    Hang Seng soars over 2% to lead Asian equity indices
•    Oil gains, gold pulls back to support at $1850 per oz
•    Apple adds new record before earnings on Wednesday
•    DAY AHEAD: UK unemployment, Microsoft earnings, Starbucks earnings
 

GURU WISDOM


“Prices are never too high to begin buying or too low to begin selling.” – Jesse Livermore
 

MARKETS


*Daily closing price
↘ EUR/USD    1.2141        (-0.21%)
↘ GBP/USD    1.3665        (-0.15%)
↘ USD/JPY    103.77        (-0.02%)
↗ S&P 500    3855.36    (+0.36%)
↗ Hang Seng    30,159.01    (+2.41%)
↘ Gold        1855.18    (-0.10%)
↗ Oil (Brent)    55.70        (+0.81%)
↗ Bitcoin    32,316        (+0.06%)
 

NEWS

 

Short squeeze


It was an epic day for traders on Wall Street with all the action in the ‘most shorted’ stocks most notably GameStop, where more than 100% of its float is assigned to short-sellers. Short selling is making a bearish bet by borrowing stock to sell it with the hope of buying it back later. 

Retail traders in popular chat forums including sub-reddits like r/wallstreetbets have been ganging together to squeeze some of the most shorted stocks. Groups of small traders buying these stocks together is pushing the price up, which is forcing the traders that are short to cover their trades. Covering the short involves buying, which pushes the stock even higher – leading to explosive upside moves. GameStop soared over 150% on Monday morning before giving up all the gains and then rebounding again.
 

Flash crash


The morning short-squeeze ended when broader market briefly tanked, sending the S&P 500 lower by over 60 points in a matter of seconds. The activity is thought to have been related to options activity in the most shorted stocks. 
 

Ether


The token of the Ethereum network struck another record high after surging 20% over the weekend, falling just short of $1500. Crypto analysts have cited a greater number of ETH whale addresses (those holding over 10,000 ETH) has increased while ETH has been pulled off exchanges for accumulation creating a supply imbalance that has pushed up the price.
 

Hang Seng


Hong Kong and China indices gained following weekend data that showed China received more direct foreign investment than the US and as China’s Xi Jinping made his keynote address at Davos 2021.
 

DAY AHEAD 


*Times in GMT
07:00 – UK ILO Unemployment Rate (3M)(Nov) [    5.1 % Exp vs. 4.9 % Prev]
14:00 - S&P/Case-Shiller Home Price Indices (YoY)(Nov) [    8.1 % Exp vs. 7.9 % Prev]
 

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