A year ago, GameStop set a multiyear intraday high at $57.74 on Nov.14, 2013, which was up almost fourfold from its August 2012 low at $15.32. On Nov. 21, the company reported quarterly results that matched analysts' estimates, and was upbeat about launches of Sony's (SNE) PlayStation4 and Microsoft's (MSFT) Xbox. But the good news was already priced in, and the stock fell in January on news that PlayStation and Xbox sales were weaker than expected during the holiday-shopping season.
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The stock set its 2014 low at $33.10 on Feb. 3, which was down 43% from the high. That is now the low end of a trading range for GameStop stock. The high end of the range was set at $46.59 on July 29.
On Thursday morning, shares of the company which is scheduled to report after the closing bell, were trading at $43.49, down 12 cents.
Analysts expect the company to report earnings of 62 cents a share for its fiscal third quarter. The focus on Thursday's report will be on sales projections for sales of Xbox One, Nintendo's (NTDOY) Wii U and PlayStation 4.
Here's how to trade GameStop.
Investors in GameStop shares should enter a good 'till canceled limit order to sell on strength at a key technical level of $49, which would expand the high end of the stock's trading range. A key to this strength will be a positive reaction above another key technical level at $45.85.
Investors should place a sell-stop order below the stock's key weekly moving average at $42.70, keeping in mind that this average will be rising each week.
If you are looking to buy GameStop on weakness, enter a good 'til canceled limit order to buy on weakness to a key technical level at $35.95.
Here's the daily chart for GameStop.
Courtesy of MetaStock Xenith
Note how the stock gapped below its 200-day simple moving average (green line) at $44.93 on Jan. 14. Since then, a sideways to up pattern took the stock up 41% to a 2014 intraday high at $46.59 into July 29. The stock is above its 200-day SMA, which is now $40.38.