Reddit Skyrockets 5.3%: Can This Legal-Driven Rally Sustain Momentum?

Summary
• Reddit (RDDT) surges 5.3% to $157.25, rebounding from a 2025 low of $107.85
• Intraday range: $154.83–$162.86, with 7.6M shares traded
• Class action lawsuits and AI-driven traffic shifts dominate headlines
• RSI at 59.8 (neutral), MACD histogram turns negative, signaling caution

Reddit’s 5.3% rally has ignited investor fervor amid a legal firestorm and shifting AI dynamics. The stock’s 2025 low of $107.85 now feels like a distant memory, with options volatility spiking and leveraged ETFs like SOCL surging 2.8%. But can this momentum hold as the market digests regulatory risks and algorithmic headwinds?

Class Action Alerts and AI-Driven Traffic Shifts Fuel Reddit’s Rally
Reddit’s 5.3% intraday surge stems from a confluence of legal and algorithmic forces. The stock’s recent lows were driven by downgrades from Wells Fargo and Baird, citing Google’s AI-powered zero-click searches as a 'permanent' threat to Reddit’s traffic and ad revenue. Now, the flood of class action lawsuits—targeting alleged misrepresentations about Google’s impact—has shifted sentiment. Investors are betting that legal exposure could attract short-covering and speculative bids, while the stock’s 52W range (49.13–230.41) offers a wide margin for volatility.

ETFs and Options Playbook: Leveraging Reddit’s Volatility for Gains
• RSI: 59.8 (neutral), MACD: 3.64 (bullish), 200D MA: 137.36 (below price)
• Bollinger Bands: Price near upper band (156.78), suggesting overbought conditions
• Turnover rate: 6.66% (healthy liquidity)

Reddit’s technicals suggest a short-term bullish bias, with key support at $145.57 and resistance at $156.78. The Global X Social Media ETF (SOCL) and Renaissance IPO ETF (IPO) offer sector exposure, with SOCL up 2.8% and IPO up 0.6%. For options, focus on strikes near $150–$160 with moderate deltas and high implied volatility:

• RDDT20250808C150: Call option with 64.4% price change, 113.53% IV, 0.66 delta. High gamma (0.0129) and theta (-1.01) suggest rapid price sensitivity. If Reddit closes above $150 by 8/8, this contract could yield 50%+ gains.
• RDDT20250808C160: Call option with 60.3% price change, 117.9% IV, 0.52 delta. Strong liquidity (470k turnover) and leverage (14.14%) make it ideal for a 5% upside (target $165.11).

Aggressive bulls may consider RDDT20250808C160 into a breakout above $162.50, with tight stops below $154.83.

Backtest Reddit Stock Performance
The performance of RDDT after a 5% intraday surge has shown positive results, with the strategy achieving an average return of 1.67% over 3 days, 5.07% over 10 days, and 13.78% over 30 days. The win rates for the 3-day, 10-day, and 30-day periods are 59.76%, 66.27%, and 76.33%, respectively.

Reddit’s Legal Crossroads: Position Now for 8/8 Expiry Catalysts
Reddit’s 5.3% rally is a legal and algorithmic tightrope walk. While the stock’s 200D MA and 52W low provide a floor, the 8/8 options expiry and ongoing lawsuits could trigger sharp swings. Watch Alphabet (GOOGL) for sector cues—it’s down 1.9%—but Reddit’s unique catalysts make it a high-conviction play. Act now: Set tight stops below $154.83 and consider SOCL for sector beta. If $162.50 breaks, the RDDT20250808C160 call could redefine Reddit’s trajectory.