Third time is the charm? Check out GameStop (GME) (June 06, 2019)GME
I want to look at GameStop ( NYSE: GME ). Yesterday, Wednesday, we held a live trading session and one of the stocks that I was looking to trade, but we never got it off, was GameStop ( NYSE: GME ). The reason is that the company had reported the worst possible earnings, they were just horrible, it was like a bad video game and they eliminated their dividend. When the dividend is eliminated that’s not a good sign at all. It’s like, hey dude we need the money here. And so the stock was basically liquidated by everybody and his brother.
I was looking for an oversold bounce but we didn’t really get one. It just never really gave us the kind of trade that we were looking for. And I don’t short a stock that’s down this much; down 30 percent and then I’m going to short the stock? It turns out that would have been a good trade, would have made over 10 percent on that. But that’s just a real low probability deal. The better move, at least in my book, is to wait for the stock to stabilize and see if you are going to get a rebound. It kind of did that during the day but I don’t day trade during the middle of the day, that’s lunch trade.
And then today the stock essentially drifted sideways, but let’s look at it on the daily chart. This is what I would call a three-candle reversal; I’m sure there is some kind of name for it but there are only two candles here. You see the big massive sell off here and then today, these are three standard deviations here. The stock tagged the lower Bollinger Band, it’s like against the law, you’re not supposed to do that. So buyers came in, swooped the stock up and closed the stock at 5.11.
I’ve got a pretty strong feeling that tomorrow the stock could come back up here and test this 5.50 level. That is 5 percent, actually, over 7 but let’s round down. That is kind of a 5 percent move and then what you do is, you keep your stop at about 4.95. Wait for the stock to stay above 5.11, that’s today’s close. You are buying the stock at 5.11, maybe a little bit above, looking for this amount, looking for 5.50, if you get more, great. But you keep your stop a little bit below today’s intraday low, at about 4.95. That gives you a 1 for 2-risk/reward trade.