The Gamestop stock price had a largely uneventful week. But as we have seen in the past, next week could be a very different story indeed for GME.
Gamestop finished the day at $213.82, -$9.77 (-4.37%)
Some of the air has been released from the latest episode of the meme-stock bubble. Gamestop Corp (GME: NYSE) followed AMC Entertainment, Clover health, Fossil, and Koss lower in yesterday’s session.
However, how much of that is the consequence of the mini taper-tantrum that rattled markets in general remains to be seen.
Clearly, equity markets will continue to digest the Fed’s new hawkish path. But does it really matter to GME? The Gamestop price is less a result of fundamentals and all to do with positioning.
According to the latest data, the total amount of GME stock lent out to short sellers is around 12 million shares which indicate ‘Days to Cover’ of 1.0.
Quite simply, if every short wanted to close their position simultaneously, in theory, based on the average trading volume, it would take 1 day to do so.
In reality, this is unlikely to be true but gives a good indication of how susceptible a particular stock is to a short-squeeze. At the peak of the January GME squeeze, the Days to Cover was around 6.0, pointing to much easier conditions for shorts this time around.
GME price outlook
The daily chart shows a number of interesting price points.
Firstly, the most recent rally fell just short of the March high. This could point to several things. One of which could be that the structure of positioning in the options market is not supportive of gamma squeeze beyond this price.
Secondly, the volume over the last few weeks is much lower than in January and March. This does not point to panic short-covering.
Finally, the Gamestop price is approaching a confluence of support level. The first of which can be seen at $210.00, which has broadly marked the low over the week.
Just below that, at $190.00, the 50-day moving average aligns with a rising trend line from the March low.
This should be considered important support. And if breached, it could lead to a breakdown in sentiment. Additionally, the 100 DMA is seen at $170.80, and I would label this the last line of defense ahead of the 19th of March low at $120.00.
In summary, the outlook does appear to be favouring the bears. But, trading meme-stocks is inherently risky and retail investors should probably avoid the temptation to get involved.
And regardless of how much research is done, Gamestop could well have another surprise in store.
Gamestop stock price chart (Daily)
Follow Elliott on Twitter.