Is the meme trade dying?

This past week on the market was interesting, in a lot of ways. In the aftermath of Gamestop, we saw the rise of the “Gang Weed” trade, centered around the God meme Tilray ($TLRY), which decided to undertake a failed rocket launch:

The major thematic trend I identified (in real time on Twitter, post-mortem here) this past week was the Blue Wave narrative, purportedly related to the Biden presidency. This is multi-faceted (not going to list all the benefitting sectors here), including:

• Clean Energy

• 2A Anxiety

• Legalized Marijuana

Legalized Marijuana

Marijuana was on everyone’s mind this past week, including mine, as we saw incredibly bullish flow into classic meme names in the space like Tilray. Tilray, much like its meteoric rise in 2018, acted as the God meme trade in the space, jumping over 150% during the week to the upper 70s per share.

This reverberation was felt throughout the pot industry, most notably in the penny stock Sundial Growers, which recorded a similar 150% return. In both cases investors piled onto the gamma trade, with call option flow massively outweighing open interest throughout the week.

As I mentioned in my past post, with the God meme effect thoroughly at play by Tuesday, we saw semantic associations play a massive role this week, as both other pot stocks (APHA, CGC, etc.) and farther linkages (psychedelics, cannabis pharmaceuticals, cannabis growing) rallied under the God meme. However, this cycle ended up lasting much shorter than anticipated versus the previous Gamestop saga. Within the span of the week, Tilray lost almost all its gains, and Gang Weed floundered. This impacted the entire semantic network, and its downfall likely stifled growth into L2/L3 linkages (e.g. Scott MiracleGro/general farming).

Clean Energy

This trade has been a dominant narrative in the Blue Wave trend era, given the assumed importance of the industry in both Biden’s agenda and cultural consciousness. This was clearly seen in the rise of meme stocks like Plug Power, Inc. ($PLUG) or Tesla ($TSLA) last year, and has taken on a new dimension in the nuclear power debate.

More curiously, retail darling Michael Burry (Twitter handle: @cassandra) pinned and tweeted on February 11 about nuclear power, hinting potentially at his investment in the industry.

Uranium has been a cult commodity for a long time, both for legitimate fundamental investors and WallStreetBets alike. While it’s been on the sidelines for some time (author note: I currently have 1x long call option in $DNN and 100 shares of $URA ETF), there’s substantial evidence that (perhaps as a semantic association to the failed #silversqueeze) interest in the radioactive element keeps on growing.

This past week, we saw the meme gamma squeeze trade hit Denison Mines (ticker $DNN), which has moved up about 50% in the month of February.

Gamma was clearly a factor here (much like Tilray), given that on the peak hype day, February 11th, the option volume on Denison was over 350x normal, with calls making 99.8% of the flow.

It seems to have settled some, and depending on continued interest may continue to rise (especially before the 2/19 options expiration date) or fall substantially (if speculators abandon the stock).

2A Anxiety

2A Anxiety was partially confirmed by the rise of Vista Outdoors ($VSTO), which gained an impressive 20% in the days following its February 4th earnings release. Undoubtably this was influenced by growing anxiety by gun owners about Biden/Democratic push for gun restrictions. Interestingly, this did not seem to benefit the laggard Smith and Wesson ($SWBI), which may be a stock to watch in the coming weeks if this trend continues. This was most dramatically shown in the rise of Ammo Munitions, Inc. ($POWW), which in part due to VSTO’s post-earnings performance and partly due to pre-earnings speculation moved up in February 50%.

Some Conclusions

Like most titles with a question in them, my answer is a resounding “No”. It was interesting to see the speculative rise and downfall of Gang Weed within a week, but the shift to uranium and guns seems like a strong bet for the coming week (depending on market performance). Similarly, we can speculate based on the Blue Wave trend that other sources of clean energy generation (solar, wind) and potentially auxiliary linkages (utility companies, miners, electric vehicles again) may be the move shortly.

As always, this is not investment advice and do your own due diligence. Have fun surfing the meme markets, friends.

Yours truly,

Lily