GameStop stock has been under a ton of pressure lately. However, the market is selling the news on its NFTs and crypto plan.
Forget the employment report. GameStop wanted the spotlight on Friday, which helped vault it higher by more than 20% at the open.
Driving the gains is the company’s new plan to leverage NFTs and cryptocurrencies. From an earlier piece on TheStreet:
"It looks like GameStop's launch in crypto is going to start with trying to be a leading marketplace for gaming NFT's," Hedgeye Risk Management analyst Jeremy Mclean said in a note this week. "GameStop is one of the first real Retail brand names in this NFT space. We think there is a real commercial opportunity to being there."
While the stock soared on the news in pre-market trading, it was up even more in the after-hours on Thursday.
However, the stock has since faded from the open and is now up “just” 7.3%.
That’s not bad given the mixed picture in the overall market following the labor report, but it’s a blow to those who were long and had large gains at the open.
Worse, the fade came from an important area on the chart.
Trading GameStop Stock
On Dec. 3, GameStop stock pulled back to $159.05 and bounced, but plunged back below that mark a few days later when the company reported disappointing earnings.
That level quickly turned into resistance, an observation that remained true on Friday morning.
I flagged the $159 level ahead of earnings, arguing that a break of it could put the $116 to $118 area in play.
The stock ended up bottoming about $3 above that range, at $121-and-change. So what do we do from here?
Following that painful but obvious rejection from this morning, GameStop isn’t done disappointing the bulls. Shares knifed right through the 10-day and 21-day moving averages as well.
It simply has to find its footing before bulls can trust it on the long side.
So far, the fourth-quarter low at $129.50 has been a decent area of stability. Even amid the one break lower that sent GameStop stock to the $121.14 low, the stock was still able to close over the fourth-quarter low by the end of the session.
On the plus side, it did fill today’s gap.
Over Thursday high at $137.70 andaggressivebulls can be long GameStop, targeting the 10-day and 21-day moving averages as the first target, then $159 as the second.
Above $160.50 and GameStop could make a run to its 50-day moving average.
Otherwise, below $137.70 and the fourth-quarter low is in play, while the 2022 low remains vulnerable.
Personally, I wouldn't consider GameStop a safe trade on the long side. Not after today's heavy fade.