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Key Insights:
- GME stock price could go through a short squeeze this week.
- GameStop’s short interest has jumped to 15% this year.
- The company will publish its financial results this week.
The GME stock price has moved sideways since June this year, and Bollinger Bands, Murrey Math Lines, and rising short interest points to a surge in the coming days, potentially after it publishes its financial results this week. It was trading at $22.6, down by 37% from its highest level this year.
GME Stock Price Technical Analysis Points to a Short Squeeze
The daily timeframe chart shows that the GME stock price has consolidated in the past three months.
This consolidation happened at an important support level, the extreme oversold level of the Murrey Math Lines, a sign that it has moved much lower than its typical range, a sign that a bullish reversal could be on the way.
The other bullish catalyst is that the three lines of the Bollinger Bands have come closer, with the upper line at $23.38 and the lower one at $22.12. This narrowing spread is a sign that the volatility has fallen in the past few weeks.
Historically, a narrowing spread of the three lines usually points to a short squeeze. If this happens, the next important level to watch will be at the strong pivot reverse point at $28, which is about 25% above the current level. A drop below the support at $22 will invalidate the bullish GME stock price forecast.
GameStop Earnings Could Lead to a Rebound
A Bollinger Bands squeeze normally happens when there is a fundamental trigger on an asset. In GME’s case, this trigger will likely be the upcoming earnings, which will provide more color on its business.
Wall Street analysts expect GameStop’s earnings to be weak as many customers have shifted their game and console buying patterns. Most of them are now buying them online instead of physical stores, where GameStop dominates.
The company’s annual results evidence this shift in trend. Data shows that the company made $3.823 billion in revenues last year, down from $5.27 billion in the previous year and $5.9 billion a year earlier.
Data compiled by Yahoo Finance shows that the average revenue estimate for the coming results is $823 million, up by 3.1% in the same quarter last year. Its guidance for the third quarter, which most analysts and investors watch, is expected to be $803 million, down by 6.6% YoY.
Most importantly, the GME stock price will react to its earnings-per-share (EPS), which is expected to be 16 cents, an improvement from $0.01 last year. Therefore, there is a high likelihood that the stock will jump if the company publishes better-than-expected results.
Strong Balance Sheet Supports the Bullish GameStop Outlook
The other important catalyst that may trigger the GME stock is its high % short interest of 15%. While a high short interest is a bad thing, it also has its positives as it makes it viable for a short squeez, as the company has done in the past.
GameStop has one of the best balance sheets in the retail industry. It owns 4,710 Bitcoins worth $527 million. Also, the company has $6.3 billion in cash and short-term investments and less than $1.5 billion in debt.
Therefore, with short-term bond yields stuck at 4.25%, it means that it is making over $150 million in interest income annually.
Summary
GME stock price remains in a bear market this month after falling by double-digits from its highest point this year. Sentiment surrounding its core business remains weak, while investors have dumped Bitcoin treasury companies, such as Strategy and Metaplanet.
However, a contrarian case can be made as the stock sits at an extremely oversold level and its Bollinger Bands have narrowed. Its short interest has also jumped to over 15%. Therefore, there is a likelihood that the GameStop stock price will rebound after earnings.
Disclaimer
This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.
