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Today, we’re opening a new bearish trade on GameStop (NYSE:GME). GME dropped dramatically in the wake of the news that Microsoft (NASDAQ:MSFT) is launching a Netflix (NASDAQ:NFLX)-like subscription program for its Xbox One video games called Xbox Game Pass.

The service will cost $9.99 per month and will give subscribers access to more than 100 Xbox One games. This is terrible news for GME because the company relies on used game sales for 47% of its gross profits and, if gamers can simply subscribe to a service like Xbox Game Pass instead of having to buy games and then sell them to companies like GME, it could dig into GME’s profits.

The stock has already dropped from resistance at $26.50, but we believe it has a lot further to go. During the past few months, the stock has dropped below $21 and below $23, in November and January, respectively, and we wouldn’t be surprised to see GME drop again to test its mid-January lows.

‘Buy to open’ the GME April 23 Puts (GME170421P00023000) for a maximum price of $1.00.

You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.