Since early June, GameStop stock (NYSE: GME) jumped to its best day, gaining more than $45.00 and finishing the day back above $200. But what comes next? Is GME about to embark on another blistering rally, or was yesterday just a blip?
The GME Squeeze
GameStop Corp is the OG of the meme-stock investing craze. GME’s 2,300% rally in January first shone a light on Reddit’s Wallstreetbets retail investing forum, making WSB one of the most talked-about players in investing circles. Members of the WSB forum had made a series of large, concentrated bets on several highly shorted stocks. Whilst GameStop was the most successful and grabbed the headlines, others, including AMC Entertainment (NYSE: AMC) and BlackBerry (NYSE: BB), also witnessed huge price surges.
However, after jumping to $483 in January, a concerted effort by brokers to quell the squeeze resulted in the video game retailer losing 90% in February. The well-published fallout led to a Congressional investigation and a Senate hearing. However, this was not the end of it.
Again in March, the GameStop stock price jumped. Although this time, it fell short of January’s record, reaching $348.50 before reversing lower by 66%. In May, GME started to get some traction, and by June, it was knocking on the door of the March high. However, again, GME failed to clear the previous peaks, and the rally failed at $344.50.
Since the June spike, GameStop has been largely ignored. The price has been trending south, and by early August was 60% lower, changing hands below $150. And until yesterday, for the last two weeks, GME had been trading in a tight range between $150 and $170.
So is GameStop about to begin its fourth bull run of 2021?
GME Technical levels To Watch
The daily chart shows that despite several sharp corrections this year, the GameStop stock price has stayed above the 200-day moving average. Furthermore, the weakness in August brought GME to within just 5% of the important indicator at $137.40. This is encouraging, and therefore, the 200 DMA (now at $140.86) should be viewed as major support.
Furthermore, yesterday’s pop lifted GME above the 50, and 100-day indicators at $176.91 and $172.15, respectively, forcing the price out of the recent downtrend.
In theory, this should put the stock on the path towards the March and June highs. However, in practice, who knows. Whilst an extension higher cannot be ruled out, it’s also not guaranteed. Although, in saying that, the price action is extremely positive and if GME stays above the 50, and 100-day averages, and the descending trend line at $167.00, it could happen.
I, for one, am interested to see how this unfolds in the coming days.
GameStop Price Chart (Daily)
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