GameStop Shares Collapse As Retail Traders Rush To Exits

GameStop Video 02.02.21.

Short Squeeze Plays Are Under Heavy Pressure

On January 28, shares of GameStop reached their all-time high level of $483 as retail traders managed to orchestrate a major short squeeze for unprepared hedge funds.

However, the stock started to lose momentum as some traders moved to other plays, and the sell-off in GameStop shares turned into a real panic. GameStop stock has recently tested the $75 level before rebounding above the $100 level.

The current panic could not be attributed to the limitations imposed by some brokers on trading of highly volatile short squeeze plays as silver, which was another target of the retail traders, is also under heavy pressure, highlighting the universal move out of the speculative plays which gained ground in recent days.

What’s Next For GameStop?

GameStop shares gained huge upside momentum on January 13, when the stock started the trading session near the $20 level and finished it at $31.40. If GameStop shares do not receive enough support from speculators in the upcoming trading sessions, the stock may start to move towards the levels that were seen before the major rally.

However, speculative traders may provide support to GameStop shares at higher levels, attracted by the major decline in the price of the stock. At the same time, it remains to be seen whether there is enough fuel for another short squeeze in the stock.

According to recent reports, the short interest in GameStop shares continued to decline as shares fell so the current downside move is caused by liquidation of speculative long positions rather than by an increase in short positions.

The major concentration of short positions in GameStop shares was the main pillar of the bullish thesis for the company’s stock, so a continued decline in short interest is a bearish signal. Most likely, GameStop shares will remain very volatile for the rest of the week, and they will clearly need additional interest from speculative traders in order to stabilize after the sell-off.

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