Gamestop (GME) Stock Price and Forecast: GME waits for breakout signal, technical levels to watch

GameStop is still struggling for momentum as retail volume exits the markets for the real world. Volume across all meme favourites GME, AMC, PLTR, KOSS and others has dropped. Volatility is also down sharply in these names, well it could not have gotten much higher! 

GME shares have been producing the odd fightback in an otherwise downtrend and technically still look bearish.

GameStop (GME) stock news

GameStop is reportedly looking for a new CEO, according to a report carried by Reuters on Wednesday. This comes as existing CEO George Sherman forfeited 587,000 shares as part of a performance award, for failure to meet targets. Obviously, those targets did not include a rising share price. This is a bit of a hit when you consider it is $91 million in forfeiture at current prices.

GameStop also announced it is to be debt-free as it announced the early redemption of $216 million worth of senior notes due in 2023. GME had announced on April 5 plans for a share raise of up to $1 billion. The redemption is to be done from GameStop's existing cash.

GameStop (GME) stock forecast

Fundamentally GME is way overvalued. Many high growth stocks bring high valuations such as Netflix, as investors bet that earnings will grow into the valuation. This strong growth allows earnings multiples to soften and eventually a successful company does not look so overvalued on a fundamental basis. Again, the ones such as Netflix.

But GameStop is at a much earlier stage. It does not yet have a proven model and instead is aiming to replicate other online retail strategies. The difference is GameStop has formidable competitors in online game sales from vested interests such as Sony (owner of Playstation) and Microsoft (owner of XBox). 

Technically the picture is still bearish. Each spike high fails lower than the previous one, as evidenced by the downtrend line from the Jan 28 high. 

The MACD crossed over in mid-March giving a sell signal and it remains in a bearish crossover. RSI is signalling neither overbought nor oversold. The Directional Movement Index (DMI) is showing the trend is weakening but no reversal.

Apart from the indicators, the chart is also painting a bearish picture. Declining volumes and a triangle formation ultimately will lead to a breakout. Usually, breakouts are sharp and triangle breakouts notably so. GME is below the 9 and 21-day moving averages which are themselves pointing lower. All bearish signs. 

Going short this one is not advised. The /wallstreetbets Reddit forum would love to see that! But buying puts is a way to profit from expected declines and limiting any downside. On Thursday, $150 puts expiring May 7th were trading around $22. Given the extended move possible on a breakout, this may be a useful strategy.

For those with a bullish bias, wait for a breakout to the upside of the triangle formation with confirmation of a break of moving average resistances and MACD crossover.

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