Bullishness in GameStop stock paid off on Tuesday, August 24. Shares of the video game retailer spiked by almost 30%. The movement came alongside a strong US stock market, showing that GME is still a meme mania powerhouse.
Wall Street Memes takes a closer look at recent GameStop stock performance.
Boring no more
Since early June, GameStop stock had not gone far at all.Boringis the enemy of momentum and GME continued to disappoint shareholders, raising doubts about whether the stock could still have the strength to shoot for new highs.
However, those who had the patience and a longer-term vision to hang on to the stock have been rewarded. Yes, GME is barely flat compared to ten weeks ago. But a bet placed six months back has produced gains of almost 94%, while one made in early January 2021 has led to gains of almost 1,200%.
What’s behind the rally
The euphoria of “meme stocks” came as Wall Street set record highs on Tuesday, August 24, driven broadly by the FDA’s Pfizer vaccine approval.
However, GME’s rally — as well as AMC stock’s (AMC) and other meme names’ – may not have had much to do with broader market drivers. Trading volume in GME was high, at approximately 14 million shares, more than 10 times the regular volume since the start of August.
Increased activity in GME options may have played a role in higher volumes and share price. Elevated short interest and short covering could have had something to do with it as well.
Next steps
GameStop enthusiasts seem to be as bullish as always. Consensus on key Reddit forums is a buy and hold until GME, which has 17% of itsfloat shorted, hits the moon. A new short squeeze, perhaps similar to what was seen in late January and February, is not out of question.
Helping to support the idea is popularity. GME is one of the most popular tickers on Reddit's top forums. Bullish days tend to boost the stock's popularity even further, creating a virtual cycle that favors the longs.
In a recent article, we listed some reasons why investing in GameStop might be a good idea. Among them, the Ryan Cohen factor– i.e. the chairman’s support of GameStop shareholders and visionary plans for the post-pandemic recovery in the brick-and-mortar business – can be a bullish driver.
All the above is not to say that GameStop will, undoubtedly, climb sharply from current levels. It is merely an indication that the stock still has fuel to burn, and that the “apes” could be well justified in their optimism.