GameStop Stock Breakout Alert: Why is GME stock higher today?

NFT rumours drive GME stock higher on Monday.
GameStop losses a top executive as the COO leaves.
GME shares surge 8% on Monday despite the COO news.

Ivan Brian FXStreet

Update: GameStop has stabilized after the strong move and pushed higher on Tuesday, marking up to nearly $210 for a gain of 4.5%. The stock broke out on Monday and has seen continued buying from retail traders. Talk of NFT business has been widely circulating among retail traders on social media.

GameStop (GME) breakout alert! Is the original meme stock back? The stock certainly made its move yesterday with a surge of over 8% to take it out of the slumber zone and back onto retail traders' attention. In percentage terms, GameStop has now turned positive for the last month and looks set for more gains as it flags a breakout, which we will discuss further down.

GME 15-minute chart

GameStop (GME) stock news

So why the move on Monday? News of a COO's departure would usually be taken as a negative, especially as she was not long in the job and had a wealth of experience. Jenna Owens agreed to leave, according to GameStop, just seven months after joining. She had been a top executive at Amazon (AMZN) and Alphabet (GOOGL). There was not much more detail given except that she is to leave immediately (actually left as of October 25) and a separation agreement was in place.

On Monday though, GameStop surged over 8%. Various social media sites are talking of a potential pivot into the non-fungible token (NFT) business for GameStop, and the talk has increased markedly on this front over the weekend. NFTs are seen as a lucrative add-on business for GameStop (GME).

Gamestop (GME) stock forecast

Newsflow both positive and negative then is in evidence, but the simple fact is clear from the chart below that this is a breakout play with momentum traders then rolling in behind the move. Witness the contraction in volume and price resulting in the triangle formation we see in the GME chart below. Triangles nearly always lead to a breakout, and this is clearly what we have got. GameStop also found support perfectly from the 200-day moving average, so keep an eye on this for future reference. The target is the size of the entry of the triangle, meaning $260 approximately. Note that no technical analysis is set in stone. These are estimated targets based on breakout theory. The key support is the breakout level at $183. Holding $183 keeps GME stock bullish, but below and it is back to neutral. Resistance is at $231, the top of the triangle and September 1 high. The RSI has also neatly popped above 50, adding to the confirmation bias.

GME 1-day chart

Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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