Investors are speculating as to why GameStop stock has dropped by nearly 10%. Recent media coverage, frequent Reddit mentions and large volume changes were among the factors that triggered the sudden price dip. The SEC is also considering the underlying market structure and regulatory framework, digital engagement practices and payment for order flow, as well as short selling practices. Ultimately, the outcome will have major implications for the future of GameStop.
For starters, it is important to realize that GME stock’s strong fundamentals will likely dilute the company’s IBD Composite Rating. The IBD Composite Rating measures both fundamental and stock performance and gives companies a score between one hundred. The IBD Composite Rating of GME stock is 64, putting it at a disadvantage compared to other companies. Moreover, GME’s score in the composite rating is lower than the market average, which is a crucial metric for assessing the performance of a company. In fact, it is lagging behind more than 64% of other companies. This is the reason why the CAN SLIM investment paradigm favors stocks with a Composite Score of 90 or higher.
Given the weak fundamentals of GME stock, it is crucial to note that the stock is still a gambler’s dream. Despite its low valuation, analysts still see the potential for quick gains. A speculative play could occur when GME stock reaches its support level at the 10-week line. If this happens, the company is still a gambler’s dream, but the company is poised to transition to a blockchain-based gaming platform.
While the GME stock price has been fluctuating near $200 for much of the year, it’s not the stock to be spooked. Traders prefer stocks that consolidate for weeks rather than days. If GME stocks can break above this support level, they may make a speculative play. In swing trading, small losses and quick gains are the key, and proper position sizing can lead to impressive performance.
While a speculative play is unlikely to result in a profitable investment, the GME stock has been one of the best-performing stocks in January. Its RS (Relative Strength) rating is 99, which is the highest value a stock can have – and is the only one in the company’s history. Traders are eager to get in on the action, as it is often the only way to make a good return.
The stock is not as volatile as its peers, but savvy traders would rather invest in stocks that have been consolidating for weeks. These stocks have a higher probability of becoming sustainable winners. While GME stock is still a gambler’s stock, it could prove to be a good opportunity if it breaks the support at the 10-week line. Likewise, traders should be cautious about shorting stocks. They may see the risk involved in shorting a stock. With that said, the company is a good candidate for a swing trade.