GameStop Corporation GME was sliding over 6% lower on Thursday, the day after Securities and Exchange Commission Chairman Gary Gensler said at the Piper Sandler Global Exchange and Fintech Conference that his staff was considering new rules around U.S. stock trading.
The changes, which would be enacted to protect retail traders, could force the abolishment of payment for order flow and the ushering in of more transparent broker requirements such as a new auction process.
Payment for order flow hit the public psyche in January of 2021 when popular retail stocks such as GameStop and AMC Entertainment Holdings, Inc AMC skyrocketed and were subsequently burned down by brokerages such as Robinhood Markets, Inc HOOD, which restricted trading on a number of securities.
Although GameStop declined on Thursday, the stock hasn’t lost the uptrend it’s been trading in since May 12, when GameStop began to rally up off the $77.58 mark. In fact, pullbacks are a healthy part of a bull cycle, although the stock will need to pop up over the 200-day simple moving average for the bear cycle to officially end.
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The GameStop Chart: GameStop’s most recent higher high was formed on Wednesday at $153, and the most recent confirmed higher low was printed at the $115.56 level on June 2.
On Wednesday, the stock rejected at the 200-day SMA, but on Thursday GameStop found support at the 50-day SMA.
- GameStop can decline about 10% further before negating its current uptrend, and if the stock closes the trading day near its low-of-day price, it will print a bearish Marubozu candlestick, which could indicate lower price may be in the cards for Friday.
- Bullish traders would prefer to see GameStop rise up to close the trading day above the $132 mark, which would cause the stock to print a hammer candlestick on the daily chart and indicate higher prices are likely on the horizon.
- The pullback on Thursday was taking place on lower-than-average volume, which is a good sign for the bulls because it indicates consolidation. As of press time, about 2.29 million GameStop shares had exchanged hands compared to the 10-day average of 6.68 million.
- If the uptrend continues and GameStop is able to print another higher high over the coming days, the stock will regain support at the 200-day simple moving average. If GameStop can trade above the level for a period of time, the 50-day SMA will eventually cross above the 200-day, which would signal a new bull cycle.
- GameStop has resistance above at $145.22 and $166.70 and support below at $116.90 and the psychologically important $100 level.
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