Bullish trading in speculative stocks can be a warning sign that the broader market is nearing a top. Bed Bath & Beyond is one of those plays, up more than 25% on Wednesday afternoon. That follows five increases of at least 20% this month. Shares ended July at $5.03 and near $26 on Wednesday. Investors cheered the rally on social media, but chart strategists caution that this type of trading could signal a market top. Shares rallied this week as GameStop Chairman Ryan Cohen’s venture capital firm RC Ventures made another bet on Bed Bath & Beyond, including positions on out-of-the-money calls. “We’ve seen it before,” said Jonathan Krinsky, BTIG’s director of market engineering. In January 2021, GameStop surged and investors jumped on meme names like AMC Entertainment and BlackBerry. This year, Bed Bath & Beyond stock hit March 28 and 29, the peak of that rally, Krinsky noted. GameStop was also up in the six days leading up to March 29, he added. Bed Bath & Beyond rallied on Wednesday, and other meme names like AMC and GameStop were lower for the day. Growth stocks were also lower, including the Ark Innovation ETF, a poster child for high growth. Small cap Russell 2000, w hich performed better, also lower on Wednesday. S3 Partners said the home appliance retailer’s recovery could continue. S3 Partners wrote in a note: “We expect the BBBY short sale to continue as losses to the market continue to mount and more new short sellers enter at this higher share price to find stock. looking for a quick stock drop,” S3 Partners wrote in a note. S3 notes that the short position in the stock is more than 50%. According to S3, the short position in AMC is just under 18% and for GameStop it is around 23%. “Usually when you get to the end of a rally, they go after highly speculative meme type names,” said Scott Redler, Chief Strategy Officer at T3Live. “That usually gives us clues that a peak is coming and that it could have been yesterday.” Missing a key threshold On Tuesday, the S&P 500 rallied above its 200-day moving average, but the broad market gauge failed to cross that threshold. The 200 day is the average of the last 200 closing days and it is often seen as the boundary between a bull market and a bear market. 200 days at 4,324 Wednesday. The S&P 500 index was down about 0.8% in afternoon trade, at around 4,272. “Over the past three days, weakness has been received,” Redler said. “If buyers don’t get in, we’re ready for a downside retracement.” He added that the S&P 500 may now have hit a summer high, after failing to hold for 200 days yesterday. The intraday high is 4,325. “When you see that highly speculative meme, junk stocks are moving like that, it means real money isn’t finding any opportunity in stocks like Apple, Tesla,” Redler said. was running in his direction,” Redler said. Apple and Tesla were up slightly on Wednesday. Since the June low, the eight-day moving average has proven to be supportive for the S&P 500, said Redler. “Those are the first spot traders to watch to see if it holds up,” said Redler. to keep buyers or not. It’s 4,230. If that doesn’t hold, traders will be more cautious and we could pull back to the 50-day period, that’s what institutions will play.” he said. Currently 3,962. “Meme frenzy is often a sign of speculation and frost and the end of a run. It looks like the broad market index hit a June low,” he said. but its course is now murky. “It’s hard to bet big on what the next move will be. But I think there is a high probability that there is more retracement… It could be 5% to 7% towards the 4,000 region,” he said, adding that the first support area would be 4.170 to 4,220. Krinsky is eyeing 4.177 to 4,200, as support. , he said.