Game Stop Corporation (GME) has recently been made infamous for large short positions managed by hedge funds getting squeezed by retail traders leveraging the power of the herd mentality through online communities. Since then, GME has been a popular topic among Youtube hypesters amd day traders.

Now that price has settled into a range for some time, it is possible to better assess risk, and potential rewards IF another break out materializes. When it comes to swing trades, we are only interested in patterns, momentum and proportional RISK, everything else (like fundamentals or news) is completely irrelevant for this type of trade idea.

A consolidation break out will be in play upon the break of the 189 level. IF price momentum follows through after such an event, it is within reason to see this stock push into the mid 250s over the next couple of weeks.

One other factor that makes this stock compelling in the current market environment is that it is not highly correlated to the S&P. This means it has more of a tendency to do its own thing no matter what the broader market is doing at the moment.

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Another Pop For Game Stop?

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Here’s the swing trade idea:

Buy Stop: 189
Stop Loss: 159
Target 1: 220
Target 2: 250
Target 3: 280
R:R 2.0

Please make sure to respect both the buy stop and stop loss orders. This is a range break out trade idea which depends on momentum follow through. IF price fails to follow through, it can test the low of the range very quickly which is in the 120s. In order to mitigate such a risk, a relatively tighter stop at 159 was chosen.

A 30 point loss is unpleasant, but it’s better than a 50 or 60 point loss. Also if you decide to take this trade with real money, make sure to size your position proportionally to your account.

For example, if you are trading with less than 10K, you should be thinking of a position size between 1 and 5 shares. If you buy 5 shares and GME pulls back 20 points, that is a 1% loss of your 10K account. Focus on RISK first.

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