Specialty electronic game and PC entertainment software retailer GameStop Corporation (GME) is one stock that is no stranger to volatility. After dropping from an area just north of $60 in late 2007 the stock didn’t find a real bouncable bottom until late 2008 closer to the $17 area, from where it rallied into the spring of 2009. For the ensuing four years the stock traded in a range, albeit a wide and choppy one, between $15.50 on the low end and almost $29 on the upper end.
In August 2012 the stock finally found a more serious bottom, which seemingly coiled the stock up and made it spring higher into 2013. The stock has since been on an unstoppable tear which in May brought it to the 50% retracement level of the entire massive sell-off from the late 2007 peak down to the August 2012 lows. GameStop Corporation (GME) has overcome plenty of technically important resistance areas in this near vertical leap since August 2012. The break out of the aforementioned trading range in April of this year was important, but from an even longer-term perspective the current juncture may hold more important clues for the stock’s fate.
On the daily chart of GameStop Corporation (GME) note that the important breakout took place on March 28th, which snapped the stock out of a wedge/pennant pattern (blue lines) and ultimately paved the way for the breakout of the longer-standing trading range discussed above. The steep rally into mid-May then quickly corrected to the 61.80% Fibonacci support line (i.e. exactly where it should have found support) into late May. The stock then immediately took off again and just last Friday June 14th re-tested the mid-May highs, which of course coincide with the 50% retracement on the long-term chart above. Should the stock be able to overcome the May highs around $39.70 it would open up the gates toward $44. Prudent traders will always be on the lookout for any potential nasty bearish reversals, which can ruin a bull party within minutes.
