It’s been a year and a half since the GameStop short squeeze frenzy. Whole books have been written to explain how the WallStreetBets crowd organized into an online army fighting for revenge against the hedge fund industry. And indeed, the army of retail investors did manage to push a couple of hedge funds into insolvency.
Alas, the stock itself is down ~75% from its January, 2021 high of $483 a share. This means the majority of small investors who followed Roaring Kitty into the trade are also deeply under water. Unfortunately for them, lightning rarely strikes twice. Given GameStop ‘s still horrible fundamentals, we think most of them will never break even.
The good news is we’ve been able to identify a very clear bullish Elliott Wave pattern on GME’s hourly chart. If the count below is correct, some temporary relief might be on the cards.
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The chart focuses on the price developments over the past two months. We can easily spot a five-wave impulse pattern between $77.79 and $152.85, followed by a clear three-wave correction, labeled a-b-c down $113.30. In other words, there is a complete 5-3 wave cycle pointing north for GameStop. According to the theory, we can now expect an upswing, whose initial targets lie above the top of wave (1/A).
In addition, GameStop just announced a 4-for-1 stock split. In the era of Robinhood, this is a bullish catalyst, even though stock splits don’t change a company’s value at all. As if cutting a pizza into 16 slices instead of 4 would somehow make the pizza bigger. But in the markets, if enough people believe something it is often enough to make it a reality, albeit only for a short while.
In conclusion, GameStop stock is offering a bullish Elliott Wave setup with a catalyst. A surge to $160 or even higher seems likely from here. Those hoping for a return to $400+ a share, however, are likely to be disappointed.
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