GameStop (GME) stock is roaring to life after sitting dormant premarket. The shares are up more than 8% at last check after the videogame retailer reported results.
That may be a surprise for investors. As reported by TheStreet, GameStop “posted its seventh consecutive quarterly loss amid fading demand and elevated cost pressures.”
The Grapevine, Texas, company's top and bottom lines missed estimates. Revenue fell 12% year over year.
When a stock rallies on bad news, it's always worth paying attention. Of course, it helps when the overall market rallies as well.
It’s also worth pointing out that AMC Entertainment (AMC) is higher on the day, up about 5%. GME and AMC are both so-called meme stocks, favorites of retail investors on social media.
Trading GameStop Stock
Chart courtesy of TrendSpider.com
As I look at the daily chart, I can’t help but notice the three-day 20% fall GameStop stock posted ahead of the earnings report. That’s likely turning today’s post-earnings action into a relief rally of sorts.
Over the past several months, $23.50 has been key support. It gave way over the past few days.
Ultimately, the November low at $21.89 held as support both yesterday and today, and now we’re seeing the shares rotate higher and attempting to reclaim $23.75.
If GameStop can do that, $25 and the declining 10-day moving average are in play. Above that opens the door to the 21-day and 50-day moving averages, then downtrend resistance (blue line).
On the downside, the low-$20s have been clear support for GameStop stock. That was the case in the first and second quarters, and more recently support has come into play near $22.
If the rally ends up fading — or if those upside levels like $23.75 and $25 act as resistance — investors need to keep a close eye on where buyers step back in.
If $22 fails as support, it opens the door down to $20. Below $20 and an even larger decline could be in store.
