Market strategist explains the 3 hallmarks of meme stocks

to more than $65 a share in its first three days of trading, well above its IPO price of $34 a share. Shares of the social network platform have continued to experience volatility, however, falling to around $49 as of Thursday's close., Trump Media also saw a decrease in value later in the week, as the stock closed Thursday's session around $62 per share.

“They’re trying to find the next hot thing, and they’re just beginning to chase it and pile into it,” Jacobsen said. “That obviously can work well, but it can also then end in tears, especially if you don’t get into those names early enough.”The first indicator of a meme stock is a "quasi-religious fervor," according to Sosnick.

On the other hand, many meme stock investors have a much shorter time horizon in mind as they look to quickly flip speculative assets if the price spikes to turn a hefty profit. Essentially, according to Sosnick’s definition, meme stocks utilize an intense passion from retail investors who are willing to take on more risk and ignore some of the more conventional investing strategies for a chance at higher returns, especially in the short term.

As for why meme stocks are back in the picture, Sikes told Yahoo Finance that a combination of investors’ familiarity with a company’s products or brand and increased market volatility is likely to blame. With stocks off to their best start in five years, many strategists on Wall Street still make a case for the S&P 500 to keep chugging higher.

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