GME Stock Forecast: GameStop Corp stuck at key resistance level

• GameStop shares ran into technical resistance on Monday.
• GME shares bounced from technical support on Thursday for a massive rally.
• The video game retailer is still setting lower bearish highs each rally.

GameStop shares are holding onto last week's gains, ignoring the Archegos effect rippling through tech stocks. GameStop closed Monday just in the green at $181.30 for a 0.17% gain. Last Thursday GameStop put in a 52% rally!

A quick little recap! GameStop is a struggling online video game retailer with shops located all around the world selling – yes, you guessed it – video games. As we all know, retail is a struggling space as online continues to take over, and this has been a trend for GameStop too. As a result, GameStop was heavily shorted by hedge funds as they bet that the price would decline further. That is when the fun began with retail traders on Reddit's r/WallStreetBets forum. They mobbed the stock and moved the shares to nearly $500 in January, before sliding back to sub-$50 by mid-February. They are now currently trying to hold near $200. 

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GME price chart

The chart shows GameStop running into resistance at the convergence of short-term moving averages, specifically the 9 and 21 averages on the daily chart. The rally last week coincided with support being reached at the 50-day Simple Moving Average (SMA). This produced a technically impressive 50%-plus rally. 

Since then the GME share price has consolidated at elevated levels near $200. If the rally does not carry higher, it is a technically bearish signal as each rally produces a lower high, running out of steam at lower levels each time. Also technically noteworthy is each sharp rally results in a close far below the intraday high. This again would be bearish.

So what do we need to see to remain bullish? First, taking out the $200 psychological resistance, closely followed by $218.93, the high from Friday, and closing above this level. This will change the picture toward a more bullish view.

Failure means a move back to test the 50-day moving average. 

Technical indicators are notoriously lagging actual price moves but can be useful to identify the overall trend. The Accumulation/Distribution index attempts to determine if prices and volume are bullish or bearish using closing prices as the main factor. If the closing price is higher than the day before, volume is determined to be buy volume, the opposite if the close is below the previous day. Similarly, the Money Flow Index uses price and volume data but gathers this over a longer time period, usually 14 days. It is more like an oscillator, showing overbought (higher than 80) or oversold (lower than 20) readings.

At current GameStop levels, the Accumulation/Distribution index is showing bearish readings, while the Money Flow Index is neutral.

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