GME down but not out, eyes weekly gain


  • GME ended Wednesday in the red at $185.81, down roughly 3%.
  • GameStop has signalled something bullish by being green in a sea of red on Monday.
  • GME and meme stocks roar on Tuesday as risk is back on.

Update July 22: Gamestop GME snapped a two-day uptrend and fell 2.81% on Wednesday, corrective from weekly highs of $195.41. GME stock failed to take advantage of the upbeat risk tone, as it settled the day at $185.81. Acceptance above the $200 mark is critical to sustaining the recent recovery. However, with new meme stocks in town, investors are shifting their focus from GME and AMC. Despite the pullback, the shares are on track to book the first weekly gain in seven weeks.

 

Monday was a pretty good day for the original meme stock – GameStop. What was a pretty bad day for markets saw GME shares buck the trend with a gain of 2.6% to close up at $173.49. Any stock that closes up when the S&P was down 1.6% deserves a closer look. When that stock is the eponymous GameStop, then we need to see what is going on. On Monday FXStreet proposed that it might be time to consider a long position in GameStop, but we did not think it was that imminent. Now though some factors may merit taking a long position but using risk control measures as GME is not to be trifled with.

GameStop key statistics

Market Cap $12.1 billion
Enterprise Value $11.4 billion
Price/Earnings (P/E) -123

Price/Book

24
Price/Sales 2
Gross Margin 24%
Net Margin -2%
EBITDA -$112 billion
Average Wall Street rating and price target Sell $88.33

GameStop (GME) stock forecast

Monday’s move can be seen as a catalyst to consider in more detail the long argument made yesterday here at FXStreet. The preference still remains to buy a dip near the $136 support, which is the May 11 low. But we may be seeing some bounce ahead of that. 

Three reasons why the risk reward is now favouring further gains on Tuesday:

1. Monday’s outperformance, up in a weak day overall for equity markets.

2. Both the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) have bounced from lows in line with price action, a confirmation of sorts.

3. The volume profile in this admittedly wide zone from $140 to $180 is high, meaning the price is more likely to find support here.

Caution is as ever needed when dealing with meme stocks and in particular the king of them all, GME. To confirm, the very short-term turnaround from Monday’s high at $179 needs to be broken, and this would then see GME trade above the 9-day moving average. The Moving Average Convergence Divergence (MACD) is still crossed into bearish territory, meaning caution is needed. Look for this to crossover for further bullish momentum.

Previous updates

Update market close July 21: Gamestop GME was unable to extend gains despite a better market mood pushing stocks higher, and closed the day down 2.99% at $185.81. Demand for GameStop cooled as investors looked out for more solid investments, although it holds on to the positive ground on a weekly basis. A break through the psychological 200.00 mark is critical at this point.

 

Previous update: The bullishness is continuing in the first half-hour of trade on Wednesday but only just about. GME is just in the green with a modest start to the session. The MACD mentioned below still has yet to crossover and GME is stalling at the 21-day moving average. Volume lightens up above $200 meaning a break could accelerate. 

Previous update: FXStreet had turned cautiously bullish on GME on Monday based on the outperformance, and Tuesday rewarded us with a 10% gain. In the process, GME stock has traded back to the short-term moving averages. Now it has moved out of the consolidation zone and back into an area of light volume, so further gains could be easier. The first target is the 9 and 21-day moving averages. Look for the Moving Average Convergence Divergence (MACD) indicator to cross into bullishness for further momentum to the move.

 

 


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