GameStop stock was looking interesting on Monday, as shares climbed 11.7%. The stock was rallying right into downtrend resistance, looking like it wanted to rotate higher.
This stock has been the leader in the short-squeeze frenzy of Reddit stocks. Investors have piled into these names looking for wicked short squeezes to the upside. While that hoopla has cooled a bit, GameStop stock price remains inflated — and in focus.
After the close on Monday, the company announced it had raised over $550 million after a 3.5 million share offering.
While some thought the initial increase in stock supply would weigh on the stock price, it’s actually sending GameStop stock higher. Can the rally last?
A look at the daily chart above highlights the wedge pattern that GameStop stock is trading in.
Bouncing between uptrend support and downtrend resistance, we need one of these levels to eventually give way. Further, GameStop traded up into the 21-day moving average, which was resistance last week.
From here, I am looking for a weekly-up rotation over $175.20, as well as the 21-day moving average and downtrend resistance. With shares up about 10% in pre-market trading, we’re getting the move we need.
Now it needs to stick. A gap-and-fade reaction doesn’t do bulls any good unless they are unloading into the pop. A sustained move over $175.20 gets GameStop to the $200 to $212 range.
Above that and the stock could start another squeeze. Below $175 and the setup is not attractive.