GameStop Bulls Attempt A Breakaway: What Does The Chart Say?

GameStop Corporation GME opened the year, on Jan. 4, 2020, at the price of $17.25 but now its stock can fluctuate $30-$50 on any given day.

Perhaps not surprising in a stock that's now trading such a high percentage of its float during each trading session. GameStop's average 10-day trading volume currently stands at 12.84 million, which means every day about 22% of its 58.54 million float is changing hands.

On June 10, GameStop's stock closed down just over $62, from where it opened the day, after reporting a first-quarter 2021 earnings beat. The company reported sales of $1.28 billion beating the Street’s estimate of $1.16 billion and a net loss of 45 cents per share, which came in ahead of the estimated 83-cent loss.

Since the stock’s bearish earnings reaction, it has since settled into consolidation and is trading sideways on the daily chart.

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The Game Stop Chart: GameStop is trading in a descending triangle pattern, holding support at the $209 level but with a tightening upper-level trading range. On June 11, for example, GameStop’s stock fluctuated over 16% compared to Wednesday when it fluctuated 9%.

On Wednesday, when GameStop hit the upper descending line of the triangle large volume, on lower timeframes, came in and attempted to break GameStop up out of the triangle, but end of day sellers dropped it back down. The long lower wicks on GameStop’s daily candles demonstrate that when the price ticks down to its support level at $209, buyers are coming in and buying every dip.

GameStop’s price action over the past five trading days has allowed it to fill a gap that was left behind on May 26 at the $219 level. The stock's reaction to earnings on June 10 caused it to leave another gap behind from $288 to $296. Because gaps are filled 90% of the time, it's likely GameStop will move up to trade in that range in the future.

GameStop is trading below the eight-day and 21-day exponential moving averages (EMAs), which is bearish, but the eight-day EMA is still trending above the 21-day EMA, which is bullish. This indicates close-term sentiment is mixed, likely due to the stock's exaggerated post-earnings movement.

GameStop is trading just under 150% above the 200-day simple moving average, which indicates overall sentiment in the stock is bullish.

Bulls want to see bullish volume come in to break GameStop’s stock up through the descending line of the triangle which would allow it to regain support of the commonly followed EMAs. If the stock can bust through the pattern, it has room to trade up toward $242 before meeting another resistance level.

Bears want to see bearish volume come in and break GameStop down out of the triangle and for the stock to lose support at $209.85. If it loses that are as support, it could revisit the $189 mark.

GME Price Action: Gamestop was trading up 3.9% to $231.71 at publication time.