Getty Images / Bryan R. Smith
- GameStop’s shares rose 47% on Thursday after finding technical support in its 50-day moving average.
- The stock had already dropped 34% after its first earnings report, since strong sales pressure failed to impress investors.
- Here is the technical outlook for GameStop shares, as they continue to exhibit greater volatility.
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GameStop rose 47% on Thursday as the stock found technical support from traders in its 50-day moving average.
The video game retailer’s first earnings release since January’s epic squeeze failed to impress investors, leading to a 34% drop in Wednesday’s trading session.
But GameStop stock buyers have stepped around the $ 125 level, which currently coincides with the 50-day moving average. Moving averages are a lagging trend tracking indicator that technical analysts use to smooth price movements and help identify the direction of the current trend.
Traders often see the 50-day moving average, which is the average daily closing price of a stock over the previous 50 trading sessions, as a short-term moving average that generally represents areas of support or resistance for a stock.
If GameStop’s shares are able to decisively maintain the 50-day moving average as support, then an increase back to its pre-profit levels of around $ 175 could be adequate. This would fill a technical gap created by his drop in profits and would also coincide with Jefferies’ new wide-ranging price target.
But a single trading day above its 50-day moving average is not a sure sign that GameStop shares will continue to trend upwards, as declining momentum indicators, such as the Relative Strength Index, suggest that fewer buyers are taking action to support actions than in previous weeks and months.
Another traders’ moving average is likely to be on the lookout if GameStop falls below its 50 days is the 200-day long-term moving average. The 200-day rising average is currently close to the $ 39 level, representing a potential 71% disadvantage compared to current levels.
But a stock’s decline below its 50-day moving average does not mean that a rapid decline back to its 200-day moving average is in order. A signal that traders look for to generate a buy or sell signal is the cross between the shortest moving averages of 50 days and the longest of 200 days.
A buy signal is triggered when the short-term moving average crosses above the long-term moving average, as it did for GameStop in September. Using this method, a sell signal for GameStop would not be generated from the bet, unless the 200-day moving average crosses above the 50-day moving average.
Freestockcharts.com