Just when we thought GameStop’s short squeeze was over we begin to see GME gain some momentum. GameStop has been the heart of the wallstreetbets movement and continues to have a strong sentimental hold on retail investors and gamers alike.
The retail investors who missed GameStop’s first squeeze either bought AMC shares or bought GME while it was still high. And if you got in when it fell back down to $40, well you’re doing pretty well right now. So, will GameStop see a massive short squeeze again? Here’s what we know.
Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.
Lets get started!
GameStop closed at $222.50 on Friday June 15th.
Trading volume is currently sitting at 7.1 million with 11.1 million being GameStop’s average volume.
Understanding the short-seller
GameStop has taken the entire internet and finance world by a storm. What is happening nowadays. Retail investors over at r/wallstreetbets have opened Pandora’s Box on short-sellers and hedge fund institutions.
Short-sellers are investors who short the stock.
Shorting a stock is the process by which sellers essentially bet on the stock price to drop. They borrow stocks at a higher cost and sell the stock low, profiting the difference.
We’ve seen GameStop drop down and consolidate at $40 after it’s squeeze peaked close to $500 per share back in January. As of June 15th it is trading around $222.50.
What is a short-ladder attack?
A short-ladder attack is a strategy performed by short-sellers where they bid on the stock at a significantly lower sell price and purchase it from one another. Thus, driving the share price lower.
How do you spot a short-ladder attack? When the stock knows nothing but gains, but something keeps pushing it down until over and over again, that’s when you’ll know.
Why GameStop has potential for a second short squeeze
- Short-sellers didn’t learn their lesson from the first time. GameStop stock is still being heavily shorted.
- With GameStop becoming a technology company, its value has not only significantly gone up but it now has even more potential to keep driving its momentum.
- Retail investors have a strong conviction towards GameStop investment. This means they’re not willing to sell the stock which in turn creates a supply and demand scenario with short-sellers who have to close their positions.
Short Share Availability and Short Borrow Fee Rate
You can see GameStop’s short share availability and short borrow fee rate using this link (via. Fintel)
It is currently lower than we need it to be at in order to squeeze shorts from their positions. This number of course changes every day and can be expected to rise as hedge funds continue to short GameStop stock.
GME Stock Analysis
Roensch Capital goes over the data for trending stocks. The information is very easy to understand and gives you insight in the market from an analysts perspective.
Be sure to check out recent videos as they’re being uploaded to stay updated with any changes that occur in the market with GameStop.
It is important to note that I am not a licensed financial advisor. Like many traders and self taught investors, all speculation is based on educated estimations based on highly reliable analysis, patterns, and documented news charts.
Volume is key to a second GameStop short squeeze
Just like AMC, GameStop will need to see a continuous runup in share volume.
When retail investors continue to buy and hold GameStop stock, short-sellers shorting the stock eventually have to buy back the stock. This demand and supply scenario results in various gamma squeezes.
The gains we’ve seen with GameStop have been a series of gamma squeezes, or incremental gains.
Usually what follows after gamma squeezes is a short squeeze if it has enough volume. The volume of shares depends on how much retail investors are purchasing GameStop stock or selling it.
You can keep an eye on it via. Yahoo Finance.
How Soon Will A Second GameStop Short Squeeze Happen?
There is so much volatility occurring in the stock market at the moment. Such volatility is usually a sign of an upcoming short squeeze as we saw back in January.
Not only are retail investors experiencing a lot of volatility, but GameStop stock seems to be in bullish territory which is great for volume.
FOMO (fear of missing out) continues to bring in new retail investors which is a great driving factor to the stocks volume.
GME seems to be experiencing gamma squeeze after gamma squeeze and we can only see it going through a second short squeeze as the overall market start to go up again.
Momentum will need to be carried out by hype. Even if a second squeeze doesn’t occur, retail investors can continue to drive the price up by buying the stock.
GameStop announces fourth quarter earnings for 2020
GameStop announced that it will be releasing its fourth quarter and fiscal earnings for 2020 on Tuesday, March 23rd after trading hours.
This announcement is very important because owners of the company will go over earnings, as well as future assessment that let retail investors know the direction of the company as a whole.
This of course can have a very good impact on the stock price should the reports come back positive.
Here is the link to GameStop’s news release –> LINK.
However, like most companies affected by the pandemic, the numbers for the last quarter weren’t the best. This shouldn’t affect the stock price moving forward though. There’s too much sentiment surrounding this stock now.
Retail investors now have the power to save any company they wish to save. Now it’s only a matter of time for GameStop to step up and raise capital so that they can innovate and provide more value back.
GameStop is currently looking for ways to operate more efficiently. While the Reddit community was able to keep them from going bankrupt, the company as a whole will need to start pulling their end.
Here’s what’s been going on with GameStop recently.
Current GameStop news
- GameStop’s CEO George Sherman has forfeited more than 587,000 shares as he failed to meet performance targets according to REUTERS on a recent SEC filing.
- GameStop is currently looking for a new CEO to replace George Sherman.
- GME shares are still up nearly 800% this year with the company’s valuation to almost $12 billion.
- Bullish GameStop options are still currently being heavily traded
So although GameStop’s CEO George Sherman isn’t fit to pick the company up from the ground up, the company is actively seeking a new CEO to takeover.
GameStop could really use a CEO like Adam Aron right now. Adam Aron is the CEO and President of AMC Entertainment. He picked up Norwegian Cruise Line back in the 90s from the brink of bankruptcy. He was also able to raise enough capital from long-life partners of the company, as well as from retail investors.
Whoever gets the privilege to run GameStop will be responsible for keep the fundamentals in the stock market tread strong.
What will happen to GameStop’s share price if they don’t profit their 2nd quarter?
Unfortunately, if GameStop does not improve their 2nd quarter earnings, fundamentals in the stock market will drive the stock price lower.
What can retail investors do?
If retail investors want to refrain GameStop’s stock price from descending, they’ll have to continue to hold and buy the stock.
If you hold a position in GameStop, it’s important that you ask yourself what your reason for holding is. Does your DD point to another possible squeeze? If so, stick to your convictions and trust the process.
Or, did you get in late and are hoping for another squeeze? I published a post outlining the differences between GameStop stock and AMC stock here.
I personally love both stocks. And I love both companies. Unfortunately I didn’t get in on GameStop before it’s squeeze so I took a position in AMC. AMC currently has an 80% chance of squeezing according to Fintel.
I would take a position in GameStop if it was a little more affordable. I do like the stock and I love the community in general.
Will another GameStop short squeeze happen?
I don’t personally think a GameStop short squeeze will happen any time soon. However, I do believe that if the company isn’t able to put a great CEO in place it will cause another overwhelming surge in shorting the stock.
Now here’s where I think retail investors will get the opportunity to replicate what occurred during GameStop’s first short squeeze. In this scenario, shorts are likely to drive the stock price very low again, giving retail investors the opportunity to engage again and squeezing shorts out of their positions.
With this being said, I’m with you apes holding GME. I have awesome memories at GameStop which I share at the end of this article.
Now let’s talk about a little justice. A major hedge fund that was attacking GameStop has now been reported to lose a significant amount of money.
Melvin Capital suffered 49% loss 1st quarter
Ladies and gentlemen this is massive. Melvin Capital is a hedge fund that has been shorting both GameStop and AMC stock.
Melvin Capital suffered a 49% loss it’s first quarter of 2021, via. Markets Insider.
Here’s why this matters:
- Not only are shorts losing money every day but huge hedge funds are bleeding
- This is a huge win for retail investors
- Unless shorts close their positions, hedge funds will continue to suffer
- Interest rates can skyrocket for short sellers enabling them to close their positions
We’ve see GameStop’s short borrow fee decrease but I wouldn’t be surprised if it begins moving back up very soon. Hedge funds have been trying to obliterate our beloved GameStop from the face of the planet. Something about them losing a lot of money feels like justice.
Believe me, I’m 100% for making money. The ethical way. You should be supporting beloved companies, not targeting them just because you see an opportunity to kick someone when they’re down.
I personally hope the karma gets worse for hedge funds betting against both GameStop and AMC.
Will GameStop stock go up again?
As long as the stock continues to be shorted and held, GameStop can expect a series of gamma squeezes to push the stock up again.
Fundamentals can also drive GameStop’s stock price up. The company will have to run efficiently by being able to meet projected goals. While replacing their CEO is the first step, the new sheriff in town will have to bring more value than George Sherman has.
In a scenario where GameStop comes close to another bankruptcy, we can expect shorts to start attacking the stock again. This means retail investors could potentially have another chance at buying the stock low and squeezing shorts out of their positions.
Gamma squeeze vs Short squeeze
A gamma squeeze are momentum gains. These usually occur from call options closing in the pocket resulting in heavy buys or purchases in the market.
A short squeeze is vigorous and can spike with no warning. This is where you see 100% gains in a matter of seconds and minutes. A short squeeze can even reach 1000% and 10,000% gains.
What is your first GameStop memory?
Leave a comment below. Do you remember your first GameStop memory? I’m sure you have many. I remember the first time my brother and I went inside a GameStop it was unreal. It was my first time inside an actual video game store. The coolest thing was seeing how many different games and accessories they had for all the consoles at the time.
Some of the most awesome memories at GameStop was seeing that brand new game on display. For me, it was Guitar Hero. My god. Seeing all the marketing behind the game and the guitar in display was heaven.
I also remember the employees giving you close to nothing for a used game, lol. What are some memories you have of GameStop? I would love to hear from you. Leave them in the comment below.
A quick message from Frank Nez
A lot of you have been sharing my posts on Facebook Groups, Reddit, Discord chats, and Twitter. Words can’t explain how grateful I am for you sharing these articles. Thank you.
Support the blog on Patreon.