Gamestop – deserted stores and stock ready to soar

• Posted by Greg Harmon
• on July 7th, 2015

You know the store Gamestop right? It is either in that half vacant strip mall in the part of town where no one goes, or the indoor mall and is always empty. The business model of selling video games on a disc or buying a licence on a plastic card seems doomed for failure in a world where every game can be downloaded. It is one of the most shorted stocks with over 43% short interest. And for a trader it presents a great looking opportunity….. to the upside.

Gamestop, $GME

Yes that is right, an upside trade. The chart above shows the sell off that found a bottom just before Christmas and reconfirmed it early in 2015. Since then the stock has moved higher. It stalled in a symmetrical triangle pattern from March to the end of May, but then broke out higher. The target on that break out is to a price of 46. It did not quite make it there before consolidating at 44.50. The chart also shows a Golden Cross, the 50 day SMA crossing up through the 200 day SMA, just two weeks ago.

That changed Tuesday with a short term push over that resistance higher. The stock sees resistance from the back half of 2014 at 45.20 where it is stalling Tuesday, and then 46. With a stop at 42.50, under the recent consolidation, the risk reward to the upside looks good. And that short interest might start to play a role as short covering if it can get over $50.

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