GameStop (GME) Falls At Heavy Resistance - Squeeze or Dump?
Updated
Just posting this chart by request. I've been following GameStop for a while. Michael Burry bought a large position over the past year, yet price continued to head to new lows. Meanwhile, a trader I know made an observation of share price's reaction to major console releases. I was a bit skeptical of the bullish argument at first, but clearly it turned out to be correct in the medium term. I will explain why, a little further down.
This chart shows some important trend lines. I'm using the monthly chart because GME has a relatively long price history, and the 50 Month MA (red) seems rather important. The trendlines in this chart I actually drew many months ago. One of them served as resistance on the recent move.
If GME can head back up this week and sustain above that first teal trendline and the 50 month MA, there is the possibility of an enormous short squeeze. On the other hand, if price rolls back below the first red downtrend line, it can easily dump back to the lows.
This isn't an attempt to predict where price will go next, but just to outline the structure of this stock. In the broader picture, video games have actually gone up in demand over the last year. With much of life being relegated to the home, entertainment has become even more vital. Retro games are also selling at much higher prices than before the pandemic. Especially if fiscal policy continues to favor a weakening dollar, we can see some fairly ridiculous price action on equities for a little while until an inevitable bubble pop. For GME, if price breaks and holds the $13-14 resistance again, we can see $29-30 fairly quickly. If it breaks above all my downtrends, it can even reach a new all-time-high, as ridiculous as that sounds. This is not financial advice! This is for education, entertainment, and speculation only.
-Victor Cobra
This chart shows some important trend lines. I'm using the monthly chart because GME has a relatively long price history, and the 50 Month MA (red) seems rather important. The trendlines in this chart I actually drew many months ago. One of them served as resistance on the recent move.
If GME can head back up this week and sustain above that first teal trendline and the 50 month MA, there is the possibility of an enormous short squeeze. On the other hand, if price rolls back below the first red downtrend line, it can easily dump back to the lows.
This isn't an attempt to predict where price will go next, but just to outline the structure of this stock. In the broader picture, video games have actually gone up in demand over the last year. With much of life being relegated to the home, entertainment has become even more vital. Retro games are also selling at much higher prices than before the pandemic. Especially if fiscal policy continues to favor a weakening dollar, we can see some fairly ridiculous price action on equities for a little while until an inevitable bubble pop. For GME, if price breaks and holds the $13-14 resistance again, we can see $29-30 fairly quickly. If it breaks above all my downtrends, it can even reach a new all-time-high, as ridiculous as that sounds. This is not financial advice! This is for education, entertainment, and speculation only.
-Victor Cobra
Note
The target for the long setup has actually been reached. What a move! Note
Well...as per my original analysis, GME has actually achieved a new ATH (something I did mention at the end of my article). This is a short squeeze, and those resistances proved to be completely futile.Note
Time for an update! Many on WSB are now wondering what's going on here. The name of the game is always liquidity. Unfortunately, after Robinhood restricted orders, buying pressure eased up, allowing prices to fall. Charts were going around displaying "low volume sells" but that's not the entire picture. In reality, it's the lack of buyers. Even though there aren't that many people selling necessarily, price can still drop if there are even less buyers to eat up the supply from the sellers. So price has dropped right back to where I'd expect it would - roughly near the previous all-time-high. Psychologically, the $65-75 range should be a moment of maximum pain for anyone who bought during the meteoric rise. And therefore, their panic-selling should provide the most liquidity for new buyers. If GME is to actually move up again, I expected these levels to be tested. This is the first time I see a potential buying opportunity. If GME falls below $65, it can head right back to my trendlines and much lower support levels. This is the risk. If one believes in this company's value long-term, these are the levels to look for entries. And yes, it can go all the way back to $15-17 and still remain in an uptrend! Note
Comment: Levels on the above chart for buying on a crash:$65-75 (already hit today)
$45
$30
$15-17
$12 (last hope)
Of course, there's always the possibility that GameStop ceases to exist in the future. There is always risk in owning individual shares. Those are just the prices I would expect to hold, if GME is to survive for the long term.
Note
NEW ANALYSIS! 
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