GameStop (GME) - Get Free Report was a strong momentum stock during the heyday of playing video games on consoles. From an intraday low of $15.32 during the week of Aug. 3, 2012, the stock rose by 277% to a multiyear intraday high of $57.74 set during the week of Nov. 15, 2013. The weekly chart will show the Fibonacci retracement levels of this rally and the ups and downs for the stock since then.
Moving forward, the stock traded as low as $31.81 in 2014 during the week of Dec. 19, 2014. This was just above the 61.8% of the big rally described above. The rebound to the 2015 high of $47.82 set during the week of Aug. 14, 2015 was a rise of 50%, and reached the 23.6% retracement of $47.71.
Things turned on a dime, with a price gap lower of 17%, on Nov. 13, 2015. On this day GameStop was downgraded by Pacific Crest on the notion that the video game retailer was being hurt by the growth of digital downloads of gaming software.
The downward spiral to an intraday low of $24.33 on Jan. 20 put the stock into bear market territory, where it remains today.
Analysts expect GameStop to earn 27 cents a share after the closing bell on Thursday. Piper Jaffray opines that a majority of consumers plan to buy a new gaming console over the next 12 months. The stock is also a short-squeeze possibility on a positive reaction to earnings.
Here's the daily chart for GameStop.
Courtesy of MetaStock Xenith
GameStop closed Wednesday at $31.73, up 13.2% year to date but in bear market territory down 33.6% from its Aug. 14, 2015 intraday high of $47.82. The stock is 30.4% above its Jan. 20 low of $24.33.
The daily chart shows the Fibonacci retracement levels of the decline from Aug. 14, 2015 high to the Jan. 20 low. The 23.6% retracement was recaptured on Feb. 26 and the 2016 high of $33.72 set on April 27 was a failed test of the 38.2% retracement of $33.29.
The stock fell back below the 23.6% retracement on May 11 and traded as low as $25.18 on June 27, the post-Brexit vote low. Tuesday's high of $32.67 was between the earnings neutral zone between the 23.6% retracement of $29.86 and the 38.2% retracement of $33.29.
Here's the weekly chart for GameStop.
Courtesy of MetaStock Xenith
The weekly chart shows a red line through the price bars. which is the key weekly moving average (a five-week modified moving average). The green line is the 200-week simple moving average considered the "reversion to the mean."
The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicates overbought and readings below 20.00 indicates oversold. A negative weekly chart shows the stock below its key weekly moving average with weekly momentum declining below 80.00 in a trend towards 20.00.
The weekly chart for GameStop is positive, with the stock above its key weekly moving average of $30.32 and is well below its 200-week simple moving average of $37.40. The weekly momentum reading is projected to rise 77.68 this week up 70.78 on August 19.
The horizontal lines are the Fibonacci Retracement levels of the rise from the 2012 low to the 2013 high as discussed earlier. If the stock can hold the 61.8% retracement and the key weekly moving average of $31.49 and $30.32, respectively, the upside is to the 50% retracement of $36.50.
Investors looking to buy GameStop should consider doing so on weakness to $28.43, which is a key level on technical charts until the end of September.
Investors looking to reduce holdings should consider selling strength to $34.44, which is a key level on technical chart until the end of this week.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.