What technical chart suggests about GameStop stock?
GameStop Corporation offers games and entertainment products in over 5,000 stores and comprehensive e-commerce properties across 10 countries. Headquartered in Grapevine, Texas (United States), the company was listed on New York Stock Exchange on February 12, 2002.
Technically, the stock has given a flat base breakout as of January 13, 2021, and thereafter, bounced sharply and marked an all-time high of $481.99. The stock has witnessed almost 2303.94 per cent upward move from the low of $20.05 in just 11 trading sessions.
On Thursday, from the high of $481.99, the stock has witnessed a correction of over 75 per cent along with a low volume. However, during the second half of Thursday’s trading session, recovery of over 60 per cent was seen from the lower level. Finally, the stock closed below the $200 mark and the price action formed a bearish candle with a long shadow on both ends.
Currently, the stock is trading above its short and long-term moving averages on both the weekly and the daily chart. This indicates a bullish trend, but the momentum indicators are not encouraging at present.
Among the momentum indicators, the 14-period daily RSI has cooled off after touching an extremely overbought zone of 98-99 and at present, its reading is 64.70. The RSI has closed below its prior swing low, and it is in a falling mode, which indicates a further downside momentum. The daily stochastic has given a breakdown of upward sloping trendline support, which is a bearish sign. The fast stochastic is trading below its slow stochastic line.
Moreover, the negative divergence is clearly visible between the daily RSI, daily stochastic and the stock price movement, which suggests a limited upside. A negative divergence occurs when the price is making a higher high, while the indicators form a lower high.
Going ahead, if the stock slips below Thursday’s sessions low of $119.99 and trades convincingly below this level, then there is a high probability that Thursday’s high point of $481.99 may become a temporary top for the stock.