• GameStop stock roars ahead by 12% on Friday.
  • Risk assets are back on the booming trail as Bitcoin bounces higher.
  • Equities could see more gains with a falling CPI print on Tuesday. 

GameStop (GME) continued its strong recent performance on Friday when it closed at $28.92 for a gain of just under 12%. Risk assets and meme stocks showed outperformance on Friday with shorter names also outperforming. But it was a broadly positive day with market breadth indicators all marking significant gains. Over 90% of all stocks in the Nasdaq and NYSE closed in the green on Friday. So why the optimism all of a sudden? Well, it all boils down to the US economy continuing to post strong economic data points and hopes for an imminent Fed pivot and a halt to rising interest rates. 

GameStop (GME) stock news

GameStop got its boost last week when earnings came in ahead of expectations on EPS. EPS was $-0.35 versus consensus at $-0.41. Revenue did miss though by just over $100 million. In truth the earnings were pretty mixed. The company is still burning cash and losing money, so it needs to arrest this fast. It does have time though with a healthy cash balance. EPS improved due to cutting costs, but the company is still running large losses.

Source: Refinitiv

GameStop (GME) stock forecast

The good thing is there is practically zero debt – a legacy of some astute capital raising. This gives GameStop (GME) plenty of time to correct itself, but it is burning through cash currently. In an unusual move, your author was bullish on GME stock last week as Bitcoin powered higher and risk assets were in demand. Before the open, we said on Friday: "Technically, we look to be setting up for a risk-on rally in the short term...Technically, holding above $19.44 is solid and means $29 is the first target. GME was oversold on the Relative Strength Index (RSI)."

Sometimes we do get things right! We even more or less closed at that $29 level we identified. Now Monday is all set up for a bit of calm as books are closed ahead of Tuesday's big CPI print. The market is expecting CPI to fall, so if it doesn't, look out below. But it should fall as oil is lower, shipping costs are lower, and commodities are lower across the board. 

A lower CPI should allow this rally to continue and extend. That's my theory, and I'm sticking with it. GME stock then should break $29 and head for $32-$33 resistance and the 200-day moving average. Above there and $40 is the next target, but it will be time to reassess at $32-$33. Holding above $27 keeps the bullish trend intact.

GME stock daily

 

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