Skillz (NYSE:SKLZ) stock is soaring Wednesday as the mobile games provider receives increasing attention on popular financial social media sites, including Reddit’s notorious WallStreetBets.
In early trading, shares of the esports tournament provider are higher by more than nine percent on volume that’s already more than triple the daily average. Earlier today, the embattled stock traded up by as much as 15 percent. Wednesday’s bullishness in the name comes after it jumped 11.1 percent yesterday.
Data indicate that Skillz ascended to the top five in terms of message volume on WallStreetBets over the past 24 hours and is among the top 10 trending tickers on StockTwits, another trading forum.
Discussions of Skillz on the Reddit forum WallStreetBets are up more than 4,000% over the past 24 hours and have surpassed talk of Corsair, GameStop and AMC,” reports Seeking Alpha, citing Quiver Quantitative.
Video game retailer GameStop and movie theater chain AMC are among the stocks WallStreetBets traders focused on over the past year, amassing significant profits in some cases while bringing notoriety to the Reddit forum. The aforementioned statistics and the sudden enthusiasm for Skillz could be signs that the name is getting close to “meme stock” status.
Skillz Stock Has Meme Credibility
The phrase “meme stock” was born from the Reddit forum WallStreetBets, or WSB in social media lingo. The cartel of retail traders is industry agnostic, meaning they’re flexible on companies’ sector and industry classifications, but there are some hallmarks WSB traders typically look for.
Notably, the names that often gain prominence in the forum are misunderstood in some form, struggling in terms of price action and heavily shorted. Skillz stock checks at least two of those boxes. The shares are down 41.15 percent year-to-date and are heavily shorted. As of Aug. 13, 57.28 million shares of Skillz were on loan to short sellers, or 23.46 percent of the total float, according to Dow Jones data.
Since March, at least three bearish research reports emerged attacking Skillz, sparking significant downside in the stock.
Outsiders view the short interest component as essential to WSB trades due to the belief that the army of Reddit traders will band together, buy a stock, run it higher and force short sellers to cover their bearish positions, fanning the flames of the rally in the process.
Potential Catalysts for Skillz Stock
Interestingly, the two-day rally in Skillz arrives almost exactly a year after Keith Gill, the WSB trader known as The Roaring Kitty, got the party started with GameStop.
Specific to Skillz, the name has some other possible catalysts lingering. It’s residing 14.76 percent below its 50-day moving average. If the current rally is sustainable and takes the stock above that technical indicator, bearish traders could grow antsy and cover positions because it’d be bullish in technical analysis terms for the stock to reclaim that line, which it hasn’t traded above since July.
Second, Skillz has been rumored to be a potential takeover target and if that speculation gains momentum and, more importantly, credibility, the stock would almost certainly rally. That would likely put shorts in a bind, too.
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