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GameStop Stock: September Tends to Be Bullish

Historically, September has been a bullish month for GameStop's stock compared to the S&P 500. Here's what investors should know.
  • Historically, September has been seasonally favorable for GameStop vs. the S&P 500.
  • Although GME's performance started slower in September than in the past three months, Q2 earnings could be a catalyst for the coming weeks.
  • GameStop's current beta indicates that the stock is at least twice as volatile as the overall market.
Figure 1: GameStop Stock: September Tends to Be Bullish

Figure 1: GameStop Stock: September Tends to Be Bullish

September Tends to Be Seasonally Bullish for GME

This chart illustrates the performance of GameStop  (GME) - Get Free Report vs. the S&P 500 on a monthly basis:

Figure 2: Ten-year seasonal performance vs. the S&P 500.

Figure 2: Ten-year seasonal performance vs. the S&P 500.

As you can see, GameStop's 1,625% rise in January 2021 skewed the results for that month. However, throughout the other months over the last 10 years, generally, in August and September, GameStop has outperformed the S&P 500.

One explanation for this pattern may be related to the holiday season. Toward the end of the third quarter (Q3), financial results are more likely to reflect stronger demand for GameStop's products due to the holiday shopping season.

However, past trends show that the market generally prices these increases into the stock for the months preceding and during Q3.

In a sense, traders tend to "sell the news" with GameStop's announcements at the end of Q3. This is one reason that GameStop stock has historically declined or stayed in line with the S&P 500 between October and December.

There is also a theory that stocks in general tend to fall before the holiday season as traders unload their holdings to minimize significant risk while the markets are closed and there is less liquidity.

What the Technicals Say

From a technical (i.e., chart-reading) point of view, the signals are a bit unfavorable for now.

The first chart below points out that GameStop's stock started September trading below its 50-day and 150-day moving averages. This suggests a break in the bullish momentum we've seen over the past three months, including a break from the $29 support from June.

Shares have been trading in a wide price band between $43 and $27 since the beginning of the third calendar quarter. Also, any potential bullishness seen in recent months has not been backed up by much trading volume.

The average number of shares traded has dropped considerably since June and even more dramatically since March and April (see the second chart below).

Figure 3: GME's technical chart.

Figure 3: GME's technical chart.

The Bottom Line

Since the meme mania began, GameStop's stock has broken traditional trading patterns. However, when analyzing its performance in an aggregate of a 10-year period, we see that September has traditionally been a positive month for GameStop, compared to S&P 500.

For a certain period, GameStop had a negative beta — indicating it moved against the broader market. This was due to the fact that the stock's retail investors ignored market fundamentals.

See the chart below:

Figure 4: GME beta's trajectory.

Figure 4: GME beta's trajectory.

However, since July 2021, GameStop has been trading at a beta above 2 — reaching a peak of 7. This indicates a correlation with the broader market.

Thus, with GameStop currently registering a beta of 2.17, the gaming retailer's stock is more than twice as volatile as any move in the S&P 500.

However, investors should keep in mind that beta and price volatility are useful for short-term risk. While high betas may indicate volatility in the short term, they do not necessarily work for long-term strategies.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)