‘We should see the GameStop Corp. (NYSE:GME) short squeeze continuing’: S3 Partners

On THURSDAY,  shares of GameStop Corp. (NYSE:GME) reached at $264.71 price level during last trade its distance from 20 days simple moving average was 156.52%, and its distance from 50 days simple moving average was 208.50% while it has a distance of 848.59% from the 200 days simple moving average. GameStop (GME) has already had quite the week, up almost 80% since Monday following news that board member and investor Ryan Cohen would play a key role in the business’s e-commerce strategy.

Bulls expect the presence of Cohen, who founded pet goods retailer Chewy, to help the company fulfill the potential GameStop fans believe it has as it transforms from a brick-and-mortar focused business to something more modern.

The GameStop bulls who see the company as an underrated, long-term value play may not be paying that much attention to the moves of the stock, but it’s hard to miss the roller-coaster ride. As the stock spiked on Wednesday, short interest continued to fall, perhaps after short-sellers learned their lesson in the late January squeeze, losing billions.

But according to Ihor Dusaniwsky of analytics firm S3 Partners, the short squeeze will continue.

“We should see the GME short squeeze continuing and more short covering in the stock as mark-to-market losses mount,” he told Yahoo Finance late Wednesday. “But as the stock continues its rapid climb, there will be short sellers waiting in the wings looking for entry points if this rally loses steam and GME’s stock price retraces.”

Short interest may have fallen, but it’s still significant: $2.76 billion with 11.18 million shares shorted, 20.52% short interest percent of float or 17.02%, depending on how you calculate it, according to Dusaniwsky. (S3 prefers the latter, as it doesn’t count the synthetic longs created from a short sale.

Past 5 years growth of GME observed at -28.70%, and for the next five years the analysts that follow this company are expecting its growth at 0. The average true range (ATR) is a measure of volatility introduced by Welles Wilder in his book, “New Concepts in Technical Trading Systems.” The true range indicator is the greatest of the following: current high less the current low, the absolute value of the current high less the previous close and the absolute value of the current low less the previous close. The average true range is a moving average, generally 14 days, of the true ranges.

Liquidity:

The stock has a market cap of $17.76B with 65.20M shares outstanding, of which the float was 54.16M shares. Analysts consider this stock active, since it switched Trading volume reached 15,679,891 shares as compared to its average volume of 43.17M shares. The Average Daily Trading Volume (ADTV) demonstrates trading activity related to the liquidity of the security. When Ave Volume tends to increase, it shows enhanced liquidity.

But when Ave Volume is lower, the security will tend to be cheap as people are not as keen to purchase it. Hence, it might have an effect on the worth of the security. GME’s relative volume was 1.05. Relative volume is a great indicator to keep a close eye on, but like most indicators it works best in conjunction with other indicators and on different time frames. Higher relative volume you will have more liquidity in the stock which will tighten spreads and allow you to trade with more size without a ton of slippage.

Important Technical Indicators Analysis Report and Volatility Measures:

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which calculates the predictable return of an asset based on its beta and predictable market returns. Beta is also known as the beta coefficient.

A beta of 1 indicates that the security’s price moves with the market. A beta of less than 1 means that the security is theoretically less volatile than the market. A beta of greater than 1 indicates that the security’s price is theoretically more volatile than the market. After a recent check, beta value for this stock comes out to be -2.00. A statistical measure of the dispersion of returns (volatility) for GME producing salvation in Investors mouth, it has week volatility of 42.77% and for the month booked as 33.77%. Regardless of which metric you utilize, a firm understanding of the concept of volatility and how it is measured is essential to successful investing. A stock that maintains a relatively stable price has low volatility. When investing in a volatile security, the risk of success is increased just as much as the risk of failure.

The volatility value is used by the investors for various reasons and purposes in measuring the fundamental price change and the rate of variation in GME’s price. The ART is a specific type of indicator, which is capable of weighing up stock volatility in the financial markets effectively.

GameStop Corp. has an average true range (ATR) of 50.46. Other technical indicators are worth considering in assessing the prospects for EQT. GME’s price to sales ratio for trailing twelve months was 3.44 and price to book ratio for most recent quarter was 51.96, whereas price to cash per share for the most recent quarter was 39.83. The Company’s price to free cash flow for trailing twelve months was 119.04. Its quick ratio for most recent quarter was 0.50. Analysts mean recommendation for the stock was 3.50. This number is based on a 1 to 5 scale where 1 indicates a Strong Buy recommendation while 5 represents a Strong Sell.

Should You Go With High Insider Ownership?

Many value investors look for stocks with a high percent of insider ownership, under the theory that when management are shareholders, they will act in its own self interest, and create shareholder value in the long-term. This aligns the interests of shareholders with management, thus benefiting everyone. While this sounds great in theory, high insider ownership can actually lead to the opposite result, a management team that is unaccountable because they can keep their jobs under almost any circumstance.

GameStop Corp.‘s shares owned by insiders remained 0.50%, whereas shares owned by institutional owners are 95.00%.

Where Do Relative Strength Index (RSI) Stands?

Perhaps, it is one of the most important indicators, because it is used in the technical analysis of the stock in the money market. The relative strength index (RSI) is claimed to depict the latest and past performances of the stock market, based upon the ending price volumes of the current trading period. The RSI is characterized as a momentum oscillator, evaluating the speed and scale of directional price shifts. The momentum exemplifies both rising and falling rates of the Price in the stock market. Using RSI, you can calculate momentum as the percentage of elevated closes to reduced closes. But if the stocks have experienced optimistic changes rapidly, then it might have an increased RSI than stocks. So, it might cause negative changes in the market.

The RSI index is largely used by traders on a 14-day time period and is evaluated on a range from 0 to 100, along with both high and low volumes marked at 70 and 30, correspondingly. Both the shorter and longer timeframes are used by the traders for shorter and longer purposes. It further adds high and low ranges like from 80 to 20 and from 90 to 10. This trend takes place less repeatedly.

However, it represents stronger momentum in the market. In the meantime, the Accenture plc’s 14-day RSI was settled at 75.37. All in all, the trends of the stock market were shifting slowly but surely.

Meanwhile, GME traded under umbrella of Consumer Cyclical sector, the stock was traded -45.20% ahead of its 52-week high and 10199.81% beyond its 52-week low. So, both the price and 52-week high indicators would give you a clear-cut picture to evaluate the price direction.

Jake Charles

About Jake Charles

This is Jake Charles, a Senior News Writer for “Stocks Equity”. I covers “Active Stocks” sector and writes about trending Active Hot companies from an exclusive and “out of the box” perspective. I worked independently as a self motivator and with the financial institute as financial adviser to invest in the Active sector for over 9 years in the developing countries by introducing new phases and ways to improve in this sector. I like to travel all over the globe to get new experience and provide by best services to the companies. As an advisor I like to work with new people to share and explore new ideas keeping in view minimizing the operating cost and giving the best final product through new technology and minimizing the time of development.

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