GameStop Breaks Bullish: Is The Stock Ape-Solutely Going Higher?

GameStop Corporation GME broke up from a falling channel Benzinga called out Sept. 8. When the gaming and electronics retailer reported its mixed second-quarter earnings Sept. 8 the stock sold off initially on the following day before rallying and closing slightly higher.  

The stock remains highly popular with retail traders and was trending again in various Reddit communities Monday. The traders continue to target GameStop to squeeze short sellers of the stock. GameStop is still an excellent short squeeze candidate due to its underlying statistics:

• Small Float: GameStop has a relatively small float of 46.5 million shares.
• High Ownership Levels: 52.63% of GameStop’s available shares are locked up by insiders and institutions, with insiders owning 17.82% and institutions 34.81%.

High Short Interest: 16.98% of GameStop’s float, meaning 7.8 million shares, is held short. This number is up from 7.66 million in August. The number does not take into consideration the amount of naked shorting taking place on the stock.

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The GameStop Chart: GameStop soared over 9% higher Monday before banging its head on a resistance level near the $209 mark. The stock was working on printing a bullish Marubozu candlestick, which indicates higher prices may be in the cards over the coming days. Bullish traders should watch for a continuation move on Tuesday or for an inside bar to signal consolidation before the next move higher.

GameStop has a gap above left behind between the $288 and $297 level that was created on June 10 following its first-quarter earnings print. Gaps on charts fill 90% of the time, and it is likely GameStop will trade back up into the range in the future.

GameStop 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 trading about 40% above the 200-day simple moving average, indicating overall sentiment in GameStop is bullish.

• Bulls want to see big bullish volume drive GameStop’s stock up above the $209 level. If it can regain the area as support, it has room to trade up toward the $225 mark.
• Bears want to see big bearish volume come in and drop the stock back down below the descending trendline of the falling channel and below a support zone at $189. If this occurs, GameStop could retrace further and test a lower support level at $169.