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GameStop: It’ll Pop … or Double-Top

Following a big breakout, GME is testing more important support


Specialty game retailer GameStop (GME) is one stock that’s no stranger to volatility.

After dropping from an area just north of $60 in late 2007, the stock didn’t find a real bounce-able bottom until late 2008 closer to the $17 area, from where it rallied into spring 2009. For the ensuing four years, GME traded in a range — albeit a wide and choppy one — between $15.50 on the low end and almost $29 on the upper end.

In August 2012, GameStop finally found a more serious bottom, which seemingly coiled the stock up and made it spring higher into 2013. GME has since been on an unstoppable tear, which in May brought it to the 50% retracement level of the entire massive selloff from the late 2007 peak down to the August 2012 lows.

GameStop has overcome plenty of technically important resistance areas in this near-vertical leap since August 2012. The breakout of the aforementioned trading range in April of this year was important, but from an even longer-term perspective, the current juncture might hold more important clues.


On the daily chart of GME below, note that the important breakout took place on March 28, which snapped the stock out of a wedge/pennant pattern (blue lines) and ultimately paved the way for the breakout of the longer-standing trading range discussed above. The steep rally into mid-May then quickly corrected to the 61.8% Fibonacci support line (i.e., exactly where it should have found support) into late May. GameStop then immediately took off again, and just last Friday retested the mid-May highs, which of course coincide with the 50% retracement on the long-term chart above.


Should GME be able to overcome the May highs around $39.70, it would open up the gates toward $44.

However, prudent traders should always be on the lookout for any potential nasty bearish reversals, which can ruin a bull party within minutes.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.

Article printed from InvestorPlace Media,

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