In an unexpected and out-of-character move – considering it had billed itself as the trading platform for average people with the aim of “democratizing finance” – Robinhood blocked users from buying shares of GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC) on Thursday.
The two stocks had been caught in one of the largest short squeezes in history, primarily at the hands of retail investors buying up shares via the Robinhood trading platform.
The targeted halt on GME and AMC still allowed sell orders, but prevented any new buy orders from executing.
The move prompted major backlash and accusations of Robinhood knowingly and willfully preventing its users from investing in the open market and putting them at a disadvantage.
A lawsuit has already been filed against Robinhood in the Southern District of New York, several members of Congress have called for a hearing into the restriction, and the SEC has announced it will be looking into what happened.
Robinhood’s CEO has claimed that the move was made because of net capital and clearinghouse deposit obligations, and not to protect hedge funds and institutional investors that had shorted those stocks.
Whatever the reason, Robinhood has created a ton of problems for itself. In addition to the investigations, the platform now has some major trust issues with its users, who have to be wondering whether more stocks will be restricted in the future.
Not wanting to risk Robinhood torpedoing future short squeeze attempts, I wouldn’t be at all surprised to see an exodus of Robinhood users taking their business elsewhere.
Trading tip of the week
While we’re on the subject of GME and AMC, I just want to drive home the point I’ve been making all week.
Investors that that been in the market for years are stunned that something like this could happen. And I get it. AMC and GME are trading at valuations WAY above their performance.
But in short-term trading, that doesn’t mean anything.
Look, anything in this world is a supply and demand curve between buyers and sellers.
Can GME go to $2000?
It can also go to $5, too. So, stop worrying about what a company is worth and watch the supply and demand curve between buyers and sellers instead.
The Wild Week Couldn’t Stop the Profits from Rolling In…
The unusual events surrounding GME and AMC are yet another reminder of just how quickly and how sharply things can change.
But in the world of trading, you can always count on one thing…
And that’s my renowned S.C.A.N. trading algorithm and its recommendations.
Just last week, while everyone was consumed with the GME and AMC stories, subscribers of mine had the opportunity to close out wins of 92% and 100%!
Whatever happens in 2021, you can count on S.C.A.N. Click here now to get on board.
Earnings report to watch
Chipotle Mexican Grill, Inc. (CMG) has had a remarkable run up in 2020 as COVID-19 has created a greater number of customers looking for easy carryout options.
But as we’ve hopefully now seen the worst of the pandemic, many are wondering if CMG is poised for a slump.
Tomorrow’s Q4 earnings report – which will be released after the close – and its forward-looking statements will be highly scrutinized.
As one of the most popular fast casual chains, this earnings report will also give us some insights into the health of the industry as a whole.