GameStop Stonk Trading Ideas For Before And After The Q3 Earnings Print

GameStop Corporation GME is set to print its third-quarter financial results after the market close Wednesday.

The heavily beaten-down stock was trading about 4% lower heading into the event and is down more than 52% off the Aug. 8 high of $47.99.

When the video game retailer printed mixed second-quarter results on Sept. 7, the stock rallied 7.45% the following day and an additional 13.2% over the two subsequent trading days.

For the second quarter, GameStop reported a loss of 35 cents per share, which beat the consensus estimate of a loss of 38 cents per share. The company reported revenues of $1.14 billion, missing the $1.27-billion estimate.

For the third quarter, analysts expect GameStop to report a loss of 28 cents per share on revenues of $1.35 billion.

From a technical analysis standpoint, GameStop’s stock looks bearish over the longer-term but is likely to bounce over the coming days. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

Options traders, particularly those who are holding close dated calls or puts, take on extra risk because the institutions writing the options increase premiums to account for implied volatility.

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The GameStop Chart: When GameStop slid lower on Wednesday, the stock bounced up from just under the $22 level, which was the low of day made on Nov. 9 and indicates the area has become support. The rebound from the level had GameStop looking to print a hammer candlestick on the daily chart, which could indicate a bounce is on the way for Thursday.

• GameStop’s plunge on Tuesday caused the stock to break down from a sideways trading pattern that GameStop has been trending in since Sept. 22. If GameStop reacts positively to its earnings print, bullish traders will want to see the stock pop back up into the sideways pattern and regain $24 as support.
• If GameStop suffers a bearish reaction to its report and falls under $21.89, an oversold bounce is likely to take place over the next few days because the stock’s relative strength index will reach near to the 30% level. If the bounce causes GameStop to print a lower high under $27.87, a downtrend will confirm, which could indicate the stock will trade lower over time.
• GameStop has resistance above at $24.03 and $27.69 and support below at $21.89 and $19.44.

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