GameStop Stock News and Forecast: GME soars on short squeeze despite risk-off sentiment

• GME stock trimmed most of its Wednesday's losses and recovers 10%
• GameStop stock is down 45% this year and 60% in the last six months.
• GME stock bounced roughly $10 from key support at $80.

Update: Despite a broader market sell-off on a classic risk-off theme, GameStop Corp. jumped about 10% to settle a turbulent Thursday at $89.57. GameStop shares soared as much as 33% at one point during Thursday’s trading and rebounded to $108.06 highs. The high volatility surrounding the GME stock triggered a halt to trading multiple times. The short squeeze in GME stocks came, as investors closed out their short positions after the meme coin hit two-month lows of $77.77 while they sought to fund their margin calls amid a meltdown in broader Wall Street indices.  

GameStop (GME) holders are few and far between now as the retail army gets smaller by the day. The current environment has totally changed, and risk assets are not worth the effort. The Fed is largely responsible for inflating a massive risk asset bubble, and it may prove to be the biggest asset bubble in history – only time will tell.

GME shares are slumping in line with everything else, but the outlook remains incredibly bearish for the meme stock. 

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GameStop Stock News

There may be some element of a silver lining as GME is oversold on both the Relative Strength Index (RSI) and the Money Flow Index (MFI). We may get a pop or bear market rally, but make no mistake, this is not going to the moon any time soon. Unfortunate timing then for the launch of "Diamond Hands, the Legend of Wall Street Bets" this weekend. With the benefit of hindsight, we can see the pandemic lockdowns and massive Fed stimulus created the perfect environment for stock squeezes of epic proportions.

Now, however, the Fed has turned off the taps and stocks are suffering. Those that gained the most are the ones suffering the most, and unfortunately, GameStop is among that group. We had data last month showing that video game sales were slowing. Now, with the Fed getting more and more behind the inflation curve, that spending is set to lessen further as inflation hits consumers' wallets. 

GameStop Stock Forecast

GameStop is fast approaching the last key support at $78. This is the low from March. If that goes, then $40 is the next realistic level for GME stock to target. Again that is a key low as GME retraced to $40 following the initial super spike in Jan/Feb 2021. The series of lower highs continues. Even each spike fails at a lower level as witnessed by the trend line in our chart below. 

Now we do have a modest silver lining in that the RSI and MFI are oversold, so a bounce may not be out of the question. It may not feel like it right now with overly bearish sentiment everywhere, but that is usually when these powerful bear market rallies can occur. Any rally should be used to exit. GameStop is not a stock to hold. 

GME chart, daily

Previous updates

Update: GameStop Corp. managed to recover on Thursday, despite panic taking over financial markets. GME added 10.12% to settle at $89.57 per share, after flirting with the critical $80 threshold. Equities sell-off started early in the European session and extended at the beginning of the US one. However, American indexes bounced ahead of the close, with the Dow Jones Industrial Average ending the day down 103 points, and the S&P 500 finishing the day 0.21% lower. The Nasdaq Composite, on the other hand, added 6 points, as techs recovered from their previous sell-off. AMC Entertainment was also able to post substantial gains, up 8.06% in the day, signalling renewed demand for meme stocks.