GameStop Shares Test The $150 Level As Crazy Rally Continues

GameStop Video 25.01.21.

GameStop Stock Rallies As Short Sellers Exit Their Unfortunate Bets

Gamestop stock is gaining more than 100% in today’s trading session as the mega-rally continues. GameStop shares got a significant impulse in early January after the company entered in a deal with RC Ventures LLC which refreshed the board and brought executives from Chewy.

The original enthusiasm quickly turned into a major short-squeeze which pushed the stock higher day by day. Importantly, the stock got very popular with retail investors who actively mentioned their bullish views on GameStop at various platforms.

The short squeeze has become much more painful for the unfortunate short sellers in recent days as GameStop’s shares rallied above the $100 level and tested the $150 level.

The current trading action signals that some traders may be facing margin calls on their unfortunate short bets as volatility increased significantly and there are big spreads between bid and offer on quotes.

The Risk Of A Pullback Is Very Significant

Analysts expect that GameStop will not have an annual profit until the fiscal period ending on January 2023. Similar stock price action can be sometimes seen in tech and biotech stocks but it is highly unusual for a retailer.

The main driver of the upside move is the major short squeeze which was fueled by the speculative activity of retail traders. Once short sellers capitulate and exit their positions, the stock will have no forced buyers and could face a wave of selling as speculators on the long side of the trade will rush to take their profits.

It should be noted that the price dynamics of GameStop shares in the upcoming trading sessions will depend exclusively on the balance between buyers and sellers rather than any fundamental news, and traders should be prepared for extreme volatility. At this point, the risk of a big pullback is very significant as RSI has reached the 95 level.

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