One stock that's quickly approaching a major breakout is GameStop (GME), a multichannel retailer of video game products and personal computer entertainment software. This stock hasn't done much so far in 2011, with shares off by around 4%.
The company reported a weak second quarter on Thursday, announcing that earnings fell 15.4% to 22 cents per share vs. 26 cents per share in the prior-year quarter. But GameStop told a good story about the future, saying that the holiday season should be strong due to hot games such as Call of Duty and Modern Warfare 3.
If you take a look at the chart for GameStop, you'll see that this stock has started to break out above a key descending trend line that started back in late June. This trend line has marked a big resistance level on the stock for the past two months, so now that the stock has started to trade above it, it could mean a major trend change is at hand.Another major positive here for GameStop is that upside volume has started to pick up dramatically as the stock has run from $18.30 a share to its current price of just under $22. Volume yesterday was 14 million, and volume today has already clocked in at 5.2 million, which is well above its three-month average of 4.2 million. One could be a buyer of this stock once it clears its 200-day moving average of $22.93 a share on solid volume. I would add to any long positions after it then trades above its 50-day moving average of $24.25 a share. I would use a mental stop just below $21 in case this stock isn't ready to start a new bullish trend change. Keep in mind that this is a heavily shorted stock that could easily get squeezed dramatically higher from here if the bulls gain full control. The current short interest as a percentage of the float for GameStop is massive 25.1%. In fact, I included the stock this week on a list of earnings short-squeeze plays.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV