GameStop Bounces 47% As It Finds Tech Support At Its 50-Day Moving Average

• GameStop stock jumped 47% on Thursday after finding technical support at its 50-day moving average.
• The stock had already fallen 34% after its first earnings report since a savage short-squeeze failed to impress investors.
• Here is the technical outlook for GameStop stock as it continues to experience increased volatility.
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GameStop jumped 47% on Thursday as the stock found technical support from traders at its 50-day moving average.

The video game retailer’s first earnings release since January’s short-squeeze epic failed to impress investors, causing Wednesday’s trading session to drop 34%.

But buyers of GameStop shares have come in just around the $ 125 level, which currently coincides with the 50-day moving average. Moving averages are a lagging trend following indicator that technical analysts use to smooth out price movements and help identify the direction of the current trend in place.

Traders often view the 50-day moving average, which is the average daily closing price of a stock over its previous 50 trading sessions, as a short-term moving average that often represents areas of support or resistance. for an action.

If GameStop stock can decisively hold the 50-day moving average as support, then a rally to its pre-profit levels of around $ 175 may be in order. This would fill a technical void created by its declining profits and also coincide with a stunning new price target from Jefferies.

But a single day of trading above its 50-day moving average is not a sure sign that GameStop stock will continue to move higher, as indicators of declining momentum like the Relative Strength Index. suggest that fewer buyers are stepping in to support the action than in previous weeks and months.

If GameStop drops below its 50 days, another moving average traders will likely have an eye on the longer term 200 day moving average. The 200-day rising average is currently near the $ 39 level, which is a potential 71% drop from current levels.

But falling a stock below its 50-day moving average doesn’t mean that a quick return to its 200-day moving average is in order. One sign traders are looking for to generate a buy or sell signal is the cross between shorter 50-day and longer 200-day moving averages.

A buy signal is flashed when the short-term moving average exceeds the long-term moving average, as happened for GameStop in September. Using this method, a sell signal for GameStop would not be generated unless the 200-day moving average exceeds the 50-day moving average.