The old adage warns us, be careful of what you wish for. But when it comes to GameStop (NYSE:GME), it’s time for bulls to wished for less volatility to consider a risk-adjusted purchase of GME stock. Let me explain.
Gone are the days of “Gamestonk!!” and Tesla’s (NASDAQ:TSLA) Elon Musk tweeting.
Largely, so is the attention that followed an army of short-squeezing, social-media-savvy Redditors whose crusade against bearish hedge funds turned GME into a household name earlier this year.
GME Stock Today
Today, bearish short interest has largely capitulated, from nearly 115% of GME stock’s float to elevated but very ho-hum levels of around 17%.
Similarly, the tweets, gifs, cute kitten pics, GameStop memes and items of that nature numbering just over 100 right now on Reddit’s WallStreetBets forum are likely meaningless noise at best.
To be fair to those current noise makers, today’s “mentions” for GME are fairly significant compared to the daily quips and other updates numbering less than 50 for top-notch blue-chips like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). That’s a plus, right?
And to begin the work week GameStop was the sixth-most-mentioned stock on WallStreetBets. That must count for something, right?
Hardly.
Demonstrably, what’s occurring today in GME stock is just a drop in the bucket compared to where it was earlier in 2021, when Reddit-mania was still going strong. The number of mentions approached 20,000 on a handful of days back in January and February — and it undeniably made a real difference as shares soared more than 2,400% and plummeted as quickly by just over 90%.
The good news is GameStop is looking quite attractive right now.
Moreover, GME’s allure has zero to do with Monday’s “outperformance” and straw-grasping, fuzzy Covid-19 logic others might console themselves with before pulling the trigger on a long position.
Bottom line, the investors — short term or otherwise — who were responsible for putting GameStop on the radar this year and pulling off life support are largely plying their trades elsewhere these days. More important, the long game for GME’s e-commerce turnaround under Chewy (NYSE:CHWY) ace Ryan Cohen is still very much in play.
GME Stock Weekly Price Chart
Source: Charts by TradingView
Just over a month ago, I discussed a hedged collar purchase of GME stock if certain technical conditions on GameStop’s weekly price chart could be met.
Admittedly, the proffered monitoring for candlestick and stochastics confirmation proved to be a couple weeks early. An actual signal combining price action and the secondary indicator occurred the week of Aug. 9 as shares traded above a bottoming hammer-like candle in conjunction with a bullish crossover.
Luckily, the combined buy signal also yielded a slightly stronger discounted entry price. And today, shares remain in a strong position for investors to gain long exposure to GME stock not far removed from the classic weekly buy decision.
Long story short, some might insist that GameStop should be avoided now that the squeeze potential stands vastly reduced and attention is elsewhere.
And sure, those parties may fail to come back and make GameStop the life of the party once more. But even so, the chance for solid risk-adjusted profits using a flexible and collar strategy are looking better than ever for investors in GME stock.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
