Home 2021 Brigades of Small Investors Continue to Drive GameStop Stock Due North

Brigades of Small Investors Continue to Drive GameStop Stock Due North

#short #squeeze #GameStop #SEC


There is no overriding or rational reason why GameStop (NASDAQ:GME) has attracted brigades of small and 1st-time investors. There is however the component of revenge against Wall Street in chat room communications online.

Many on Wall Street are pessimistic. They believe that GameStop’s stock can not hold onto these huge gains.

The company as it stands today cannot make big enough profits to justify its $22.2-B market valuation anytime soon.

The stock closed Wednesday at 347.51. Analysts at BofA Global Research raised their price target Wednesday to 10/share.

The Securities and Exchange Commission (SEC) said Wednesday that it has noticed all the volatility in the market. The agency said it’s “working with our fellow regulators to assess the situation and review the activities” of professional and retail investors in the market.

All the outsized action raises concern that investors are taking excessive risks. Fed Chairman Powell when asked Wednesday whether the Fed’s moves to support markets now is helping to push stock prices too high.

Chairman Powell downplayed the role of low interest rates and pointed to investors’ expectations for more DC economic stimulus as drivers for record stock prices.

Last wk, GME shares spiked more than 100% on a strong short squeeze.

Note: A short squeeze forces those who bet against the shares to buy (cover) in order to halt bigger losses, thus driving the stock price higher.

Look at short interest numbers, the data shows that they are rotating fast in here. This is not a game for the weak of heart, non-professionals, and/or those without deep pockets.

The story behind last wk’s spike involves a response to short seller Citron Research’s recent prediction that shares of the video game retailer will drop to 20 each. Last Tuesday Citron’s managing partner Andrew Left announced he would list 5 reasons why the shares will do a deep dive.

He went on to list the reasons why he thinks the stock will go down to 20/share when it was trading at 50.

WallStreetBets (WSB), a forum on the message board platform, pushed back on Mr. Left’s call helping to create a massive short squeeze on GME.

The reaction from WSB users and other retail investors sent the stock up more than 100% last wk. And last Friday, WSB users celebrated the GME’s drive to record highs.

Mr. Left said he would stop talking about the stock, Tweeting: “We are investors who put safety and family 1st, and when we believe this has been compromised, it is our duty to walk away from a stock.”  

As we noted recently GME had been trending higher prior to last wk. On 12 January shares finished at 19.95 after GameStop announced Ryan Cohen was joining its Board of Directors. Mr. Cohen is an activist investor and co-founder of pet retailer Chewy (NYSE:CHWY).

Many of our Key technical indicators are flashing Very Bullish in here, however we are Neutral as the stock is very over bought.

GME closed Monday at 76.79 after marking 159.18 on nearly 118-M/shares. The Key support is at 17.70 and there is no resistance.

GameStop Corp. operates as a multichannel video game, consumer electronics, and collectibles retailer in the United States, Canada, Australia, and Europe.

The company sells new and pre-owned video game platforms; accessories, including controllers, gaming headsets, virtual reality products, and memory cards, new and pre-owned video game software, and in-game digital currency, digital downloadable content, and full-game downloads, as well as network points cards, and prepaid digital and prepaid subscription cards.

It also sells collectibles comprising licensed merchandise primarily related to the video game, television, and movie industries, as well as pop culture themes.

The company operates its stores and e-Commerce sites under the GameStop, EB Games, and Micromania brands; and collectibles stores under the Zing Pop Culture and ThinkGeek brand, as well as offers Game Informer, a print and digital video game publication featuring reviews of new title releases, game tips, and news regarding the video game industry.

As of 1 February 2020 GME operated 5,509 stores across 14 countries.

The company was formerly known as GSC Holdings Corp. GameStop Corp. was founded in Y 1996 and is HQ’d in Grapevine, Texas.

Have a healthy day, Keep the Faith!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.