GME Stock: it’s the game now for GameStop Bulls
These days, it’s so yesterday for this year’s new breed of movers and shakers on Wall Street and those celebrating it. But with the fast-paced action of the cash and the cameras’ attention turned elsewhere, it’s time to play GameStop (NYSE:GME) store bulls looking at a larger, somewhat more durable image. Let me explain.
Reddit’s Wallstreetbets discussion board and online brokerage disruptor Robinhood made a name for themselves in 2021.
And without being judgmental, it all started with “Gamestonk !! ?? “ or rather the GME action for less enthusiastic market observers than You’re here (NASDAQ:TSLA) Elon Musk.
An overview of the GME share
If readers need a CliffsNotes lesson on recent events, in January GameStop was, as a question and frowning evening news has alerted us, the epic short-squeeze saga. GME stock pitted a mostly pint-sized David against much larger, professional shorts down to their eyeballs in bearish positions on GME stocks totaling 1.4 times the float.
There have been other short-squeezes and two for the price of a low-priced and heavily shorted stock to be sure. AMC (NYSE:AMC). Blackberry (NYSE:BB). Alpine 4 Holdings (NASDAQ:ALPP). Producers of sundials (NASDAQ:SNDL) and many more. And maybe one or two made the wallets of this merry bunch of marauder wallets bigger and even a little earlier than GME stocks.
But that was unequivocally the GME stock exchange.
Shares of the besieged physical video game retailer exploded in percentage of around 2,700%, gained over 460 Benjamin’s and jumped into a big league valuation of around $ 40 billion in less than four weeks from the start. of the new year. .
It didn’t last. And just as quickly, GME stock fell 92%, from a high of $ 483 to a three-week low of $ 38.50. And during that time and until today, unsurprisingly, players and cameras have turned their attention to other stocks or markets that needed attention. Dogecoin !! (CCC:DOGE-USD)
Exploit financial markets
Still and as a result of dizzying stupidity, the rise of GME stock’s brief good fortune has not been in vain and has been smartly capitalized on by GameStop.
Tapping into the capital markets while obtaining was more than just good. And the company got rid of its debts while filling the war chest with the outfit. And GameStop isn’t interested in hoarding money for a rainy day, either.
Today and with a management that includes Soft (NYSE:CHWY) ace and co-founder Ryan Cohen, a plan to become the “Amazon of the game”, a profitable turnaround slated for next year and who knows, maybe another fortifying ace up his sleeve as a crypto adopter – GameStop 2.0 looks like a separate possibility.
GME weekly price chart
Source: Charts by TradingView
If a reinvigorated and hopefully more lasting bid on GME stocks is to occur today or in the near future, the stocks will need to remove the resistance formed over the past two months. The good news is that the challenge looks near and worthy of a buy today. Well, a little bit.
Technically, several weeks of constructive internal candlestick consolidation work in GME continued to maintain the 76% retracement level. The observation is that this is a positive point for equities.
Another beneficial feature is that the price action was bolstered by a confirmed double bottom bullish formation. Additionally, the structured activity is complemented by a properly aligned stochastic indicator that exits oversold territory.
What more could investors ask for? As suggested, a side barrier close to $ 190 will need to be overcome before anyone other than day traders or high frequency types can begin to truly appreciate an emerging profitable trend as being ongoing.
The return of shorts
But let’s not kid ourselves either. It’s not just about the expected benefits of GameStop.
Short interest on GME shares fell from less than 20% in February to 30%. This represents an increase of almost 50% and puts GameStop stocks back into the ranks of the shortest stocks on the market. And more than seeing these bears as pawns to help the bulls dance to victory, I would strongly suggest a collar strategy for a long GME position. It also recognizes a still significant downside risk built into today’s relatively calm weekly candlesticks.
Here is the bottom line (and I hope to help with that future profitability). It’s always about having smart defense first when it comes to GME. July’s $ 150 / $ 290 necklaces combination is a fully hedged and highly adaptive spread that can help investors get their game started.
As of the publication date, Chris Tyler does not hold (neither directly nor indirectly) any position in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Chris Tyler is a former floor-based derivatives market maker on the US and Pacific stock exchanges. For additional market information and related thoughts, follow Chris on Twitter. @Options_CAT and StockTwits.