Meme coins, penny stocks, short squeeze and roaring kitties. How do we capitalize on the hype, but also protect our gains, manage our emotions, and manage the simultaneous euphoric and fear mongering sentiment on social media? 

There are typical phases to the hype markets that we see play out time and time again, being aware of these can help us to manage the trades for what they are, a tool to make money in the markets, and avoid the pitfalls of watching gains disappear, or worse yet, turn to losses.


From a technical standpoint, there are several things to keep watch of that can help you take profit, and learn when the trade is going against you. It is normal in big hype/short squeeze names for trades to move several hundreds of percent. This also means that they will have 30-70 percent drawdowns, even in the middle of continuing higher. Sitting through these drawdowns can be very difficult if you haven’t taken any profit, because it can be hard to differentiate when the move is done, and likely to just fade lower for a long time, vs. one pullback in the broader trend. 

By using ema strategies or trend strategies to mark when a downshift is coming, we can lock in some profit and wait for the trend to re-present itself. We can adjust this for varying time frames to plan our exit strategies. On large hype names that move several hundred percent, where we want to keep ourselves in the market, a scale out strategy where we scale out into a double, and remove our initial investment, and some profit, is a great way to protect our capital while also staying in the trade for continuing hype.


Halts are a part of market dynamics. Internet chatter will try to have you believe it’s criminal, and the market makers are deliberately trying to interfere with the natural movement of a stock. But market dynamics have rules to keep order books running smoothly, and halts are part of this to prevent flash crashes in price. Halts both up and down occur when a name trades 10% in one five minute trading period. The halts last 5 minutes, and the bid and ask can change after this time both up and down. 


Companies that experience short squeezes will use those opportunities of higher prices to issue more shares of the company to raise cash. This is a common strategy by these smaller companies to remain solvent, and is to be expected on any short squeeze stock.


The hardest part of holding through hype names is the emotional reactions we have, and the emotional attachments we develop. When the gains are going well, we tend to think further to the future on more gains. A typical rule would be when you want to tell people about your gains, it’s time to lock some in. Attachment to name in the face of giving back gains and losses is another very common emotion. Make sure you’re not scouring for confirmation bias, reasons why you should hold on. Create your plan for holding or exiting while things are going well, or better yet before you enter the trade, so that you are more likely to act how you want to when faced with the emotional aspect of a drawdown, even a drawdown that is still in profit feels like a loss of unrealized gains.

Risk Management

Names can halt and open at unexpected prices and require considerable risk management. Drawdowns of 30-70% are common even in the uptrend. Eventually hype tickers have a dark winter where they remain depressed for a long time, most never returning to hype prices. Manage your risk with what you can afford to lose, protect yourself with proper position sizing for the drawdowns, overnight action and halts. 

Live Example - GME Halts 9 Times
Live Example - GME Halts 9 Times