GameStop Looks Set To Break Above Major Bellwether Indicator: The Bull, Bear Case

GameStop Corporation GME shot almost 10% higher on Monday after rising almost 15% between May 4 and Friday. Benzinga reported on that day that it was likely to happen due to the stock breaking bullishly from a falling channel.

The stock topped out at the 200-day simple moving average after trading higher in a confirmed and consistent uptrend. The 200-day SMA is an important bellwether. Technical traders and investors consider a stock trading above the level on the daily chart to be in a bull cycle, whereas a stock trading under the 200-day SMA is considered to be in a bear cycle.

The 50-day SMA also plays an important role in technical analysis, especially when paired with the 200-day. When the 50-day SMA crosses below the 200-day SMA, a death cross occurs whereas when the 50-day SMA crosses above the 200-day, a bullish golden cross takes place.

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The GameStop Chart: A stock is unlikely to break up through the 200-day SMA on the first attempt, and GameStop may need to consolidate under the level for a period of time before bullish momentum comes in. If that happens, the stock may consolidate slightly above the area for another period, which would give bullish traders more confidence going forward.

• GameStop’s most recent higher low within its uptrend was formed on Friday at $21.75 and the most recent higher high was printed at the 23.25 mark on May 17. Monday’s high-of-day will serve as the next higher high within the pattern if GameStop close Tuesday’s trading session lower.
• Should GameStop forms an inside bar pattern on Tuesday, with all its price action taking place within Monday’s trading range, the formation will lean bullish for continuation. If the stock breaks down under Monday’s low-of-day, bullish traders will want to see the stock hold support at the 50-day SMA.
• GameStop has resistance above at $27.69 and $28.34 and support below at $24.03 and $21.89.

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