Most of you are probably wondering - what is going on with Tupperware stock… For one moment, it looks like the stock is preparing for bankruptcy as it grinds lower, but in just a few days, the stock is up nearly six times from its all-time-lows of $0.61/share.
As of the writing of this article, Tupperware stock is up a mind-blowing +86% after hours.
What the hell is going on?!
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I believe Tupperware’s brand needs no introduction. They specialize in producing home product lines, and have made their name through offering limited lifetime warranty on their core product offerings.
Earlier this year however, Tupperware declared that they were nearing bankruptcy as they were weighed down by a $705 million debt burden, which was further exacerbated by their declining sales figure.
Upon the release of the news, you can observe that the price-discovery mechanism of the stock market kicked in, and the stock was trying to determine the “fair value” of the business.
That said, despite the supposed gloomy outlook of the company, the share price seems to have reacted as though it’s the Tesla of kitchenware (being sarcastic of course).
The primary consensus on why there is such a sharp rally is because investors are busy piling into the stock, trying to cause a short squeeze.
Essentially, it is an unusual phenomenon that triggers rapidly rising prices in a stock - usually not because of a fundamental business reason.
As much as we like to believe that the stock market is rational (most of the time), we need to remember that it is essentially an aggregation platform of all demand and supply of investors. In order for a short squeeze to happen, one of the prerequisites is when many investors bet against a particular stock, usually in the form of short-selling it.
They do so by borrowing shares from existing owners of the stock, selling them at the current price to the market, and betting that they are able to buy back the shares they borrowed for a cheaper price and profiting from the difference.
However, if they are wrong, they are then forced to buy at a higher price and pay the difference between the current market price versus the price at which they borrowed the stock at. And it is also because as they exit their position, they will have to key in buy orders, and this action from the short sellers will push prices even higher - which might attract even more new buyers to come in and speculate - which will result in a reinforcing cycle.
In 2021, the finance world was “schooled” by a bunch of retail traders that banded together - which fueled rallies across heavily shorted companies like GameStop, AMC and Bed Bath & Beyond. This basket of stocks that caught the attention of retail investors were later coined as “meme stocks”.
There are probably a few key conditions in order for stocks to join the “Meme Movement”:
“As of late, Tupperware and Yellow’s stocks are currently amongst the Top 10 most watched equities on Stocktwits, a popular website with retail investors.”
Furthermore, Tupperware’s Cost to borrow fees (which is the amount that short sellers must pay to borrow the stock) rallied from 6.52% on July 12th, to a whopping 141.21% on August 1st, according to Fintel.
As of 15th July, Tupperware has 27% of its float being shorted according to Marketbeat, coupled with the fact that Tupperware’s daily shares transaction volume 5x in the past 2 weeks.
On all counts, it does seem like Tupperware is primed to join the leaderboard for short squeezing activities.
On a fundamental level, Tupperware is a travesty.
Top-line revenue growth has been on a steady decline, albeit a slight recovery in 2021 - which was boosted by the momentary interest for containers during the pandemic.
In 2022, net income has turned negative, with an even uglier picture on the cashflow side of things. Coupled with the heavy debt obligations carried on their books, Tupperware seems bound to go bankrupt - which is why I would understand the thought process behind shorting this stock.
However, at least in the short term, Tupperware stock has turned into a special situation as logic is no longer the guiding principle.
Clearly, Tupperware stock is fitting only for trading and speculation for now, with zero case for it to be a long-term buy-and-hold (at least not until we see some tectonic shift in how they manage and run the business).
We spoke to with our 7-figure resident mentor, Alson Chew (who de-code price action manipulation of the markets) - there was a sign of a bear trap which is shaded in gray for TUP.
The bear trap is a sign of the market maker intentionally pushing down the stock price to trigger stop-losses below the $0.66 support level, while they accumulate under the radar before pushing it up again.
Currently for TUP - the Meme Stock Short Squeeze is well under-way, and there is no sure-fire way to know how sustainable the squeeze would be, particularly if it is a concerted effort amongst retail traders.
Therefore, we do not suggest chasing the hype on Tupperware stock now. Instead, if you are interested in uncovering other bear trap patterns BEFORE they rise rapidly - we follow different Price Action Manipulation Strategies to profit from this Stock Market manipulation.
For traders that are intending to ride the wave on TUP - we hope that you will exit profitability.
Chi Keng caught the investing bug from the age of 20 under the influence of his dad. Passionate to share his knowledge and perspective, he kickstarted his YouTube channel back in 2021 and has since garnered more than 2.5 million views on his investment analysis videos. With 5 years of market experience under his belt, he is now managing a 6-figure personal portfolio. He holds a Double Degree in Finance and Accounting from the Nanyang Business School.
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