The well-known American video game, consumer electronics, and wireless services retailer, GameStop Corp. (NYSE: GME) seem to be poised for a price surge as per its latest charts.
Bullish Indications
#1 Bullish Engulfing: The daily chart shows that the latest candlestick pattern of GME is a bullish engulfing candlestick pattern. This is a bullish pattern that indicates that the price may move higher in the short term.
Daily Chart – GME
#2 RSI Oversold: The daily chart shows that the RSI is currently moving up after reaching oversold levels. This points to a possible reversal from the prevailing downtrend.
#3 Oversold Stochastics: The stochastics oscillator shows that it is currently near oversold levels and moving up.
[hana-code-insert name=’adsense-article’ /]The %K (blue) line has also crossed above the %D (orange) line.This indicates a possible reversal from the current short-term downtrend.
#4 CCI moving up: The CCI is moving up from oversold levels below -200, indicating a possible reversal of the current downtrend.
#5 Good Support Levels: GME has a good support nearby (marked as pink dotted lines).
This also acts as a good level for a bounceback.
#6 Downtrend Broken in Weekly Chart: As evident from the weekly chart, the stock was in a downtrend during the past several weeks. This downtrend line is marked in blue color. The stock has currently broken out of this downtrend. This is a bullish sign.
Weekly Chart – GME
#7 Double Bottom: The stock is currently forming a double bottom pattern which is marked in pink color. A Double bottom pattern is a bullish reversal pattern, indicating that the stock could possibly move upwards shortly. This is a bullish sign.
#8 MACD above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a bullish signal.
#9 CCI Moving Up: The CCI is currently above -100 and moving up, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of GME at the current price of $14.05.
TP: Our target prices are $17 and $25 in the next 3-5 months.
Note: If the stock shows resistance at $20, exit half your holdings at that level.
SL: To limit risk, place stop-loss at $12.60. Note that stop loss is on a closing basis.
Our target potential upside is 21% to 78% in the next 3-5 months. For a risk of $1.45, our target rewards are $2.95 and $10.95. This is a nearly 1:2 and 1:8 risk-reward trade.
In other words, this trade offers nearly 2x to 8x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the support level with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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