GME certainly has been a momentum stock since July. I like the business model and competitive barriers. The technical’s, however, are beginning to flash caution signals. A correction may have already begun on Sept. 25. Each subsequent day the stock has realized lower lows, lower highs, and lower closes. Today with GME pulling back 1.51% today on high confirming volume, while the broader market declines .47%. The stock breached the significant 20 SMA, and is approaching the 50 day SMA. The 12/26 day SMA is below the 9 day and declining, and the Stochastics are telegraphing weakness.
Please also consider the top five institutional investors with 27% of the outstanding shares, could materially affect the share price, if they lock in Q-3 or yearly profits or they diversify their holdings. Shorts are 19.2% of float, well above the 10% threshold considered to be high. Company officers, including the Chairman, CEO, President, and CFO, selling 47.1 million shares in September, at prices ranging from $ 49.52- $ 50.14. Taken together, this puts downward pressure on stock appreciation, and suggests that senior management may believe that the stock is fully valued in the near term.
The external environment over the next two weeks is perilous. Next week congress tackles the September 30 expiring budget, and the extension of US debt limits, and Syria remains a near term wild card. High Beta stocks such as GME, frequently outperform in a rising market and over correct during pullbacks.
In summary, near term risk adjusted returns favors adding to or acquiring a position closer to the $ $ 39.44- $ 39.74 summer low’s or depending on the magnitude of the correction, the $ 35.51 200 day SMA, support level, is likely to be tested in October.
Thank you for your perspective. My conclusions are derived from a combination of technical analysis, and known external factors.....budget, debt authorization, etc.....over the next several weeks. They reflect probabilities, not certainties. Since September 19 the S&P has declined by 2%, since September 17 GME realized a 4% pullback. In both cases the lower high's and lower low's have been nearly sequential.
While a short squeeze can happen at any time, they are usually driven by positive company specific events. GME reports earnings on November 11, what positive catalyst do you expect next week to precipitate a short squeeze.? On October 4, 296, $ 52/$ 53 put options expire. This is not an unusually large amount when put in the context of 371 expiring options are below that strike price. Furthermore, many of the option holders may either roll out the options to a later date or have protected their position with lower priced put options.
As discussed in earlier post. I, and many others look at risk adjusted returns. IMO the preponderance of the data suggests the shares are more likely to decline over the next several weeks than appreciate. The data is factually accurate, the conclusions drawn from the data are for each investor to decide.
I also like the mid to long term prospects for GME, but share your view that over the next several weeks the risk/return is decisively weighted negative at a $ 49+ share price. Absent a positive catalyst, that is unlikely until the company reports November 11, the stock is more likely to continue it's correction in October, before resuming appreciation.
crkenmore, Do you just always trail around eyesandears51 and reply within minutes of whatever they post? When I click on your name that is what it appears is happening. One might even assume you are the same person...