As We Brace for the Fed, I'm Opening the Door for a Meme Stock Play
This AI-powered home speculation company has an intriguing story, but requires further inspection.
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Trading on Fed Day is always boring until the fireworks hit when the news is announced at 2 p.m. ET. Expect some fast swings, and in the next day or so, we will see whether a new trend or theme emerges.
Even if we get a selloff on a hawkish Fed Chair Jerome Powell, there will be dip buyers and some good technical support, which will help deliver some positive December seasonality. I expect this to be driven by individual stock picking and speculation rather than index- or AI-driven action.
The AI bubble has essentially busted, as intense competition is underway. That means there will be winners and losers in the group, not just a celebration of any company that labels itself as AI.
After we see the initial reaction to the Fed, we can sort things out and start looking for some trending action to embrace for a December run.
In the meantime, I’ve been looking for new ideas and took a look at Opendoor Technologies (OPEN) , which had a run a couple of months ago and is being celebrated as a meme stock. There is a significant short position and mostly negative analysts, but an organized group called Open Army has embraced the stock and is actively promoting it as a "lottery ticket" play.
OPEN is an "iBuyer," which means it uses AI and complex software to make near-instant cash offers to homeowners who want to sell their houses. It provides quick liquidity and then looks to profit from a resale. It also earns money from fees and related real-estate services tied to the transaction.
The bullish argument is that OPEN is a turnaround play on the housing cycle. If management’s “Opendoor 2.0” plan works, then even a modest housing recovery will produce huge upside, because the model is highly leveraged. Meme investors also like the short interest and high level of skepticism that benefited prior meme plays.
It is an interesting story, but there is no evidence at this time that it is going to work. What the story needs is better price action in the stock. If the chart improves, then I would buy it, because that would be some confirmation that either the fundamental story is gaining traction or that the meme buyers have enough buying power to move it. I have no confidence at all based on current information that they will be the "Carvana" (CVNA) of real estate.
What I’m going to do is put OPEN on my watch list, and I’ll report on the health of the chart periodically. If this is going to be a big winner, then the chart will improve, and we’ll start seeing some new highs and better technical action. I see no reason to tie up valuable capital when it isn’t doing anything. I’ll keep you posted as the chart develops.
Put that on the back burner, and we’ll focus on the reaction to Jerome Powell and his band of Merry Pranksters.
At the time of publication, DePorre had no position in any security mentioned.
