GME stock analysis: is the party over?

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GameStop stock may remain range-bound in the short term

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A woman walks past a GameStop store in Turin, Italy – Photo: Shutterstock
                                

GameStop Corp reported revenue of $1.18bn (€1bn, £854m) in the fiscal second quarter for 2021, a 26% increase on the $942m earned in the same quarter last year. This beat analysts’ expectations of $1.12bn in sales, according to FactSet. However, GameStop’s adjusted net loss of $55m, or 76 cents a share, fell short of analyst estimates of a net loss of 67 cents a share.

The shares of the video gaming retailer fell after the results announcement, despite being one of 2021’s biggest “meme stocks” – a company share price that’s been driven by commentary on social media. This has been a trend in 10 out of the previous 11 quarterly announcements. The company’s new chief executive Matt Furlong did not take any questions during the conference call.

GameStop’s chairman Ryan Cohen, the co-founder of e-commerce platform Chewy, raised hopes during the company’s annual meeting in June when he said: “We are trying to do something that nobody in the retail space has ever done.” However, there have been no specifics from him since.

Wedbush analyst Michael Pachter, who has a sell rating on the stock with a target price of $50, said in an interview to Yahoo Finance: “I… am waiting for his brilliant strategy, and it’s not going to be brilliant. If it was brilliant, then he would have let us know, months and months and months ago.”  

Will the meme stock attract buyers after the results? What do the charts suggest? Read our GME stock analysis to find out.

GME technical analysis: weekly chart

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GME technical analysis, weekly chart – Credit: Currency.com

The GME stock price has been hugely volatile in 2021. Since March, the stock has been trading between $130 and $344.72. This suggests that traders are buying near the support of the range and booking profits near the resistance.

The 20-week exponential moving average (EMA) is flat and the relative strength index (RSI) is just above the midpoint, indicating a balance between supply and demand.

This balance will tilt in favour of the bears if they sink and sustain the price below the $130 to $115.73 support zone. Such a move could result in a sharper decline to $85.

On the other hand, the bulls will have to push and close the price above $344.72 to signal the start of a new uptrend.

GME technical analysis: daily chart

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GME technical analysis, daily chart – Credit: Currency.com

The GME share price has been trading in the lower half of the large range for the past few days. Both moving averages are flat and the RSI is near the midpoint, signalling that the consolidation may continue for a few more days.

The first sign of strength will be a break and close above the immediate resistance at $240. A break above this level could open the doors for a possible move to $344.72. This level is likely to attract profit-booking by traders.

Conversely, if the bears sink the price below the 50-day simple moving average (SMA), the stock could gradually drift toward the support at $130. As this level has previously acted as a strong support, the bulls may again try to defend it.

A strong rebound off $130 could indicate that the range-bound action may continue for a few more days.  

GameStop stock: buy or sell at these levels

GME stock analysis shows that the price is stuck in the lower half of a large range. The indicators suggest the consolidation may continue for a few more days. In a range, buying on a bounce off the support and closing the position near the resistance offers the best risk to reward ratio. Trading inside the range is usually random and volatile.

The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should do your own research or contact your financial adviser before arriving at a decision.

Trader sentiment (on leverage)

Daily change

Further reading

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