During the past few years, GameStop Corp. (NYSE:GME) has had declining sales and operating deleverage. With the e-commerce boom in 2020 and lockdowns in stores, GME’s net income had turned negative. But last week, the company’s stock received a boost from an unusual move. Reddit investors rallied around the stock and helped the company strengthen its balance sheet.
The latest trend suggests that the short-sellers are dumping the stock. If the stock falls below the 200-day moving average, it could be a good short entry. But if the stock continues to rise, it will likely be targeted by pump-and-dump traders. While the stock has mostly been trading in a blue channel since 2002, the recent dip might allow speculators to snap up the stock for a low price.
GameStop stock rallied 40% in March, but is trading differently in April. While the stock has a bull case based on its high valuation and share price, the stock’s performance is disconnected from its fundamentals. Even GameStop’s insiders may not be convinced by Wall Street firms. A bullish case, therefore, doesn’t mean that GameStop will fall below the $100 mark in the near future.
If GameStop stock were to plunge, investors may want to wait for a more positive market environment. The initial recovery in GME stock could entice would-be bulls to enter the stock, which would create a short squeeze and heavy trading volumes. Then, the stock could begin a trend toward the growth sector. With any luck, the stock price may rise higher and continue to grow in the future. If GameStop stocks continue to rally, investors will want to buy them.
In January 2021, the SEC will begin investigating GME stock price swings. The regulators will investigate large changes in volume, frequent mentions on Reddit, and elevated short interest. They will also examine the company’s regulatory framework and trading practices. A dark pool trading strategy could be used to short GME stock. The SEC’s investigation is likely to reveal fraudulent activity in the GME stock market. This news will likely make the market more volatile and ripe for fraud and manipulation.
GameStop has not yet made a full recovery from its recent pandemic. Although GameStop has managed to rebound in recent quarters, the company’s historical performance makes little sense as an investment. Gross margins have been dropping for several years and SG&A expenses have exceeded gross margins since 2019. The heightened valuation has been largely due to a flurry of hype around the stock, but that trend might wane soon.
During late January 2021, GameStop’s stock price hit a new high, despite restrictions and short selling by hedge funds. The stock has been volatile since, and hasn’t regained its January high. You can keep track of the stock’s price with the help of a graph or a special offer. There are numerous online brokers that allow you to track GameStop stock. You can also buy it without high fees and choose from a variety of other investments.