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.
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.
Here's the weekly chart for GameStop.
Courtesy of MetaStock Xenith
The weekly chart for GameStop shows that the 200-week SMA (green line) was the staging area from which the longer-term momentum run began when this average was $22.60 in January 2013.
The weekly chart is positive with its key weekly moving average at $42.70. The momentum reading shown in red at the bottom of the graph is rising at $70.08 from $61.71 a week ago, which is still below the overbought threshold of $80.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates GAMESTOP CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate GAMESTOP CORP (GME) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins."
You can view the full analysis from the report here: GME Ratings Report