Trading the Meme Stocks: ContextLogic (WISH)

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Meme stocks seemingly have taken over the entire stock market. If you don’t believe that perhaps you’d agree that at the very least they have become main talking points.

© TheStreet Trading the Meme Stocks: ContextLogic (WISH)

Each day we’re seeing more and more stocks join the list. What started off as a short-squeeze play on GameStop and AMC Entertainment a few months ago has morphed into a whole new ballgame.

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After these stocks started to gain steam, TheStreet’s Jim Cramer told readers that Beyond Meat would be next – and it was.

But since then, dozens of others have joined the list, including BlackBerry , Clean Energy and ContextLogic .

ContextLogic has been all over the map lately. At Monday’s low, the stock was trading at $7.52. At Wednesday’s high, shares hit $15. In other words, shares were a few pennies away from doubling in just a few days.

The action is beyond wild and a growing list of traders are getting frustrated with this price action. Many say it’s akin to a circus act – an embarrassment within the markets.

ContextLogic was up more than 30% at one point Wednesday, but shares are now down about 5%. Here’s what to watch for if you dare to trade a speculative doozy like this.

Gallery: 10 Stocks That Could Be Headed for a Dive (GOBankingRates)

Trading ContextLogic

© Provided by TheStreet

On Monday, ContextLogic flirted with a major breakdown below $7.50. That area has been strong support over the last month, as the stock has been under considerable pressure. Keep in mind, this stock was north of $30 earlier this year.

We’ve seen a painful bear market sweep through growth stocks and SPACs, and it didn’t spare ContextLogic stock.

However, on Tuesday we saw a massive spike as the “meme trade” took over. Shares of ContextLogic ripped through the 10-day and 21-day moving averages. Despite flirting with a breakdown below $7.50, shares quickly powered through $10 and closed north of $11.50.

Although ContextLogic was putting together a torrid rally, it ran into resistance from the 50-day moving average and downtrend resistance (blue line). At least, temporarily.

Shares gapped higher on Wednesday, but again, did so right into resistance. This time, resistance was near the $15 mark. We’ve since seen a fade back to the 50-day moving average.

Now investors are in a tough spot. The stock is wobbly, but still has “meme potential.”

If shares close below the 50-day moving average, a test of the 10-day moving average could be next. A close above the 50-day keeps $15 in play. Above $15.50 and the 21-week moving average is a possible upside target.

This article was originally published by TheStreet.

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