Is Genius Brands Stock Set For A Multi-Day Short Squeeze? A Technical Analysis

Genius Brands Internation Inc GNUS excited retail traders on Monday when it announced it will hold a conference call at 10:30 a.m. ET Wednesday to "discuss a positive business development." Rumors between some traders on Twitter swirled that the kids media company may announce it's being acquired by a larger company, with a few traders guessing Genius Brands would be a target for Walt Disney Co DIS.

Although the scenario seems extremely unlikely, traders piled into the stock and Genius Brands closed the trading day over 50% higher. A short squeeze could be in the works because Genius Brands has fairly high short interest with 16.15% of its 279.75 million share float held short.

See Also: Is Genius Brands Stock a Good Buy?

The Genius Brands Chart: Genius Brands busted through six different resistance zones on Monday as it skyrocketed toward its June 9 high of $2.30, but before reaching the level the stock hit a resistance zone near the $2.05 area and was unable to break through during regular trading hours. In extended hours, Genius Brands busted through three more resistance zones and hit a high of $2.47 at 5:30 p.m., but on Tuesday morning was trading lower.

Genius Brands’ rally was created with extremely high volume, which indicates there is a high amount of trader and investor interest in the stock. 110.25 million shares of Genius Brand’s stock exchanged hands on Monday compared to the average 10-day volume of 20.42 million.

The sudden swing north caused Genius Brands’ relative strength index (RSI) to shoot directly up from about 42% on Friday to over 80% on Monday. When a stock’s RSI reaches or exceeds the 70% mark it becomes overbought, which can be a sell signal for technical traders. The stock may need some sideways consolidation eventually to cool the RSI.

Genius Brands is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. The stock is also now trading above the 200-day simple moving average (SMA), which indicates overall sentiment is bullish.

• Bulls want to see some sideways consolidation, at least one lower timeframes, and then for big bullish volume to come in and push Genius Brands up through the $2.05 level. If the stock can regain the area as support, it has room to trade up toward $2.30.
• Bears want to see big bearish volume come in and knock Genius Brands down below the $1.89 and $1.76 levels, which could cause the stock to fall back below the 200-day SMA. Below the levels, there is further support at $1.66.