GameStop stock is still below active resistance, but if it can clear that level, a significant rally could get under way.
GameStop (GME) – Get GameStop Corporation Report had a volatile start to Thursday trading, with the shares opening 4% higher, giving up the gains and then leaping more than 11%.
Now the videogame retailer’s stock is somewhere in the middle, with shares up about 6% after the company reported earnings.
For the second quarter, the company lost 35 cents a share. That was wider than the loss of 19 cents a share in Q2 2021, but it beat analysts’ expectations calling for a loss of 38 cents a share.
Revenue fell 3% year over year to $1.14 billion, missing expectations of $1.27 billion.
So why is Wall Street clearly overlooking this less-than-ideal report?
Well, the shares had declined in six straight sessions ahead of the earnings report and in 14 of the past 15 sessions, dropping about 24% and 43% in those spans, respectively. That’s pricing in a lot of bad news.
Second, investors seem to be cheering the company’s new partnership with FTX, which according to TheStreet is “one of the world’s biggest cryptocurrency and derivative exchanges.”
The company added that it would “introduce more GameStop customers to FTX’s community and its marketplaces for digital assets.”
Let’s look at the chart to see if we can gather any clues.
Trading GameStop Stock on Earnings
Daily chart of GameStop stock.
Chart courtesy of TrendSpider.com
GameStop stock hasn’t touched its 10-day moving average since Aug. 18, and when it did, it was knifing through this measure amid a nasty 6.4% one-day decline.
This is the level I am now watching on the upside. In fact, there are two levels, but the 10-day is the first one.
Since falling below the 10-day moving average, GameStop stock has nearly been cut in half. To me, this measure is the first line of active resistance and the bulls need to prove that they’re in control by reclaiming this mark. If they can’t, it looks like nothing more than a dead-cat bounce after a big decline.
If GameStop stock can clear this level, it opens the door up to the $33 to $35 area. There we find a bevy of key measures, including the 50-day and 200-day moving averages, as well as the weekly VWAP measure.
On the downside, keep an eye on these two levels: $24.07 and $23.42.
The first level is the post-earnings low. The second level is the September low.
If GameStop loses both of these marks, then it opens the door down to $20 — which has been significant support this year — followed by the 200-week moving average.
In the short-term, watch $24.07 on the downside and the 10-day moving average on the upside.
