GameStop stock gains more than 100% as meme-stock market returns with a vengeance

GameStop stock (GME) rose as much as 118% in premarket trading Tuesday, adding to a rally Monday that sent shares of the video game retailer up 74%.

Monday's move, in which the stock rose as much as 110% and was halted for volatility several times during the trading session, followed the reemergence of Keith Gill, also known as "Roaring Kitty," whose bull case on GameStop ignited the meme stock rally back in 2021.

GameStop shares had been flat year to date ahead of Monday's rally, but had risen about 60% in the past month. GameStop stock is now up over 180% over the last month, not including Tuesday's pre-market gains.

Monday's gain in GameStop was also accompanied by a rally in AMC (AMC), which rose nearly 80%.

Early Tuesday, AMC stock was up another 120% in premarket trading. In an SEC filing, AMC also disclosed it issued approximately 72.5 million new shares, raising some $250 million for the company in the process.

Other heavily-shorted stocks rallying in premarket trade on Tuesday included SunPower (SPWR), up 55%, Beyond Meat (BYND), up 23%, and The Children's Place (PLCE), up 10%.

In a note to clients on Tuesday, Nicholas Colas, co-founder at DataTrek Research, wrote this recent trading action "feels like an echo of early 2021, when this account helped fuel a vicious short squeeze in GameStop."

Colas noted that move back in 2021 was quite a bit larger than what we've seen so far this time around, with GameStop stock rising 1,500% in January 2021 before forfeiting most of those gains.

The pain short sellers endured during the original meme stock rally three years ago hasn't deterred bets against these companies, however. Short interest in GameStop has remained elevated since that meme rally, data from S3 Partners showed, with 24% of the float sold short as of Monday.

Ihor Dusaniwsky, managing director of S3 Partners, told Yahoo Finance on Monday that GameStop shorts were down over $1.3 billion in month-to-date losses in May following Monday's rally.

Tuesday's early spike will add to this tally.

In Colas' view, a trader short a stock rallying with this kind of aggression is left with only one option: "your only choice is to close out the position regardless of the price."

"In the case of GME, you are also afraid that retail traders will be enticed into a replay of 2021," Colas added.