- Trump Media loses 5.4% on Wednesday, its most subdued move recently.
- Chair Powell lent the market some optimism, but markets are dour overall.
- Reddit stock also sagged midweek as traders ignore meme stocks for the moment.
- The $45 to $50 window is acting as a new support region for DJT.
Trump Media & Technology Group (DJT) has gained 2% in Thursday's premarket session to reach $49.82.
Trump Media stock shed another 5% on Wednesday as the market continued to turn its nose up at the former president’s meme stock. DJT dropped 5.4% to $48.81 on Wednesday, only slightly higher than Monday’s close in a session in which the stock collapsed 21.5%.
US equities were mixed on Wednesday as risk-off has been the mode all week. Comments from Federal Reserve Chair Jerome Powell that interest rates were likely this year helped the S&P 500 and NASDAQ Composite arrive at timid gains by the close.
Trump Media stock news
Trump Media continues to be one of the most highly-shorted stocks on Wall Street. It has only been a week since Donald Trump’s social media vehicle (which owns Truth Social) consummated its merger with the Digital World Acquisition Corp (DWAC) SPAC, but DJT’s meme credentials are not being questioned.
DJT stock has risen as high as $79.38 in the past week before dropping back to the high $40s. Since March 22, DJT has experienced greater than 10% swings on five of eight occasions. Only about 5% of shares outstanding are being shorted at the present time, but the vast majority of shares can’t trade at present since insiders must hold onto their stakes for six months following the merger. This means that about 25% of the float (~21 million shares) is held short.
Demand for short bets exploded when Trump Media filed its full 2023 results earlier this week. Traders discovered that the upstart social media company run by Trump acolyte Devin Nunes produced just $4 million in revenue in all of last year while losing $58 million.
The expectation is that Trump will monetize much of his stake in September after the six-month waiting period is up in order to deal with his many legal problems and pay for his reelection fight, which should put heavy pressure on the share price. For instance, the $25 put expiring in January 2025 closed on Wednesday at $13.65, meaning that DJT would need to fall below $11.35 per share in order for the option to become profitable at that strike price.
DJT is being compared to another newly-public meme stock, Reddit (RDDT). Similar to Trump Media, Reddit is an unprofitable social network that has seen its share price trade in a volatile fashion as retail traders load up on the shares. DJT waxes and wanes on the prospects for a Trump presidency 2.0 rather than on discounted future cash flows.
Penny stocks FAQs
Originally, penny stocks were any stock that traded for less than $1, i.e. pennies. The Securities & Exchange Commission has since altered the definition to include any stock that trades for less than $5. Penny stocks are typically associated with small companies that have either experienced poor results, sending their share price down, or with companies who dilute their share price by issuing lots of shares over time in order to fund operations or acquisitions.
Some penny stocks trade on respected exchanges, such as the NASDAQ or the NYSE. Examples of these are Mullen Automotive (MULN) and Bark (BARK). Those exchanges have requirements though. For the NYSE, listed stocks must have 1.1 million publicly traded shares outstanding with a market value of at least $40 million. The NASDAQ requires a share price minimum of $4, a minimum of 1.25 million shares and a market cap of $45 million. Most penny stocks, however, trade on the OTC (over-the-counter) market. This may mean the OTC Bulletin Board or the privately-owned OTC Markets Group.
Quite often the sharpest movers on any normal trading day are found among penny stocks. This is because non-penny stocks tend to have more liquidity, and the market is more certain about larger companies’ long-term values. Penny stocks are illiquid, meaning there is little supply available if an announcement drives more buying demand into a particular stock. There are no market makers that hold large amounts of penny stocks just to dispense them at a slightly higher price point. Additionally, most of these penny stocks suffer from a news desert where few market players know anything relevant about them. This is why a small biopharma company can issue news about a successful drug trial and immediately rocket 500% higher, with no analysts on Wall Street covering it.
Typically, the answer is “No”. Penny stocks are more risky than higher-priced stocks on average. Penny stock investors have a higher chance of losing their capital by investing in weaker companies. There is a reason why they are penny stocks in the first place, which is that largely the mainstream market is not interested in investing in them. Two groups of investors tend to focus on penny stocks, however. The first group are day traders, who know that the lack of liquidity in penny stocks could lead to extremely large swings over a short time period. The other group is made up of investors who like the fact that these stocks are disregarded. This allows these investors to gain an advantage by benefiting from upcoming announcements, because the larger market is not paying attention.
Trump Media stock forecast
After soaring in the $70s, DJT stock is back where it belongs in the high $40s. The region from $45 to $50 has seen plenty of volume since January (when it was DWAC), and it appears to be a weigh station on the path toward further gains. DJT's long-term prospects may be poor, but the present time shows that there is appetite for many more sessions of euphoria.
The 20-day Simple Moving Average (SMA) has been staying ahead of its 50-day counterpart for months, which foreshadows more price spikes. Traders should only consider selling if DJT sinks below the $45 boundary.
DJT daily stock chart
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