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Is GameStop Stock a Gamble?

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Is GameStop Stock a Gamble?

GameStop stock is one of the best stocks to buy on dips in the market. The company has high demand for its products, such as its game consoles. However, its margins are low, and it is not a leader in the industry. That’s why it’s a great idea to invest in this stock. In addition to making a profit, GameStop stock has a relatively low EPS Rating. A leading stock typically has an EPS Rating of 80 or higher.

Despite GameStop’s recent gains, GME stock is still a gamble. It is not a sustainable winner, and it has had a poor performance in the past. Traders on Reddit identified hedge funds with huge short positions in GME stock and began buying them to trigger a short squeeze. They bet that hedge funds would lose money closing their short positions, which caused the stock to rally. Ultimately, the gamble paid off.

While it’s possible to trade speculatively on a stock, it is better to wait until it reaches its long-term support level. This is because GME stock’s long-term prospects are much more stable. The stock could drop back down to earth again as GameStop’s revenue drops. A short seller’s strategy is to be patient. They’ll be willing to bet on a dip as long as the shorts are holding their positions.

Moreover, GME stock’s fundamentals are weak, which means it’s worth investing in it only if you have a lot of money. The IBD Composite Rating (IBD) of this stock shows that the fundamentals are poor, and the stock is lagging behind 64% of its peers. The CAN SLIM investment paradigm, which favors companies with a high Composite Rating, is not suitable for this stock.

A positive news story can propel GME stock to the top of discussion boards. The news could include anything from improved business fundamentals to a surge in meme mania. Alternatively, the stock’s recent deterioration could be a warning sign. It is better to invest in a stock that’s consolidating. The higher the price, the more chance it has to rise. A speculative approach has the potential to turn a losing stock into a winner.

Similarly, GameStop stock recently surged in pre-market trading. The company’s new board members were executives from Chewy, Ryan Cohen, and Michael Payne. Traders on Reddit also identified hedge funds with huge short positions in GME stock and started buying shares in order to create a short squeeze. By triggering a short squeeze, these traders bet that the shorts would lose money closing their short positions and move the stock upward.

In January, GME stock gained more than 1,600%. As a result, individual investors coordinated a buying spree by posting messages on online message boards. This action caught the “shorts” unaware. They faced unlimited losses unless they bought the stock, which further fuelled the gains. As a result, the stock’s RS has increased by more than five times its value compared to the S&P 500.

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