This $30 Million Meme Stock Surges 400% as Speculative Action Returns

Worried trader

The indices stayed positive on Wednesday but it was not wildly euphoric action. Investors remain hopeful about progress in Iran but the only thing that is clear about the situation is that nothing is certain and the two sides appear far from any agreement. Enough positive developments kept oil in negative territory and put some pressure on interest rates, which was enough to hold the market together.

Under the Surface

The S&P 500 managed a gain of about 0.6% but Microsoft (MSFT) hit new lows for this cycle and the Magnificent Seven (MAGS) remains lackluster. The large-cap technology leadership that drove the market higher for two years is still not showing up.

The more interesting action was underneath the surface. The iShares Russell 2000 ETF (IWM) gained more than 1.2%, biotechnology as tracked by the iShares Biotechnology ETF (IBB) bounced more than 2%, and we even had an old-fashioned meme play in Urban-Gro (UGRO), an ultra-thin name that surged more than 400% on the day. Urban-Gro is losing money with trailing 12-month revenues under $20 million and a market cap now around $30 million. That kind of action has not appeared in a while and is very intriguing in the context of the current market action.

Speculative moves like that do not tend to happen in the teeth of a bear market. They are a sign of optimism rather than despair. When investors are buying worthless small caps for the thrill of it, there is risk appetite somewhere in the system. It suggests there will be aggressive buying when clarity finally arrives on oil and Iran.

Game Plan

I added a couple of names today but am still waiting for better chart development and less choppy macro conditions. The action is improving, but the risk of negative developments remains high. Keeping some powder dry for better opportunities ahead.

Have a good evening. I'll see you tomorrow.

At the time of publication, DePorre had no positions in any securities mentioned.