Key Takeaways
- GameStop shares popped nearly 8% in extended trading on Thursday after a report surfaced that the game retailer turned meme stock is considering investing in bitcoin and other cryptocurrencies.
- The stock looks set to break out above a falling wedge pattern in Friday’s trading session, setting the stage for a potential move higher.
- Investors should watch key overhead areas on GameStop’s chart around $29, $32, and $42, while also monitoring an important support level near $25.
GameStop (GME) shares popped nearly 8% in extended trading on Thursday after a report that the brick-and-mortar video game retailer turned meme stock is considering investing in bitcoin (BTCUSD) and other cryptocurrencies.
The company is weighing up whether to invest in alternative asset classes, including crypto and bitcoin, CNBC reported citing sources after Thursday’s closing bell.
The report follows GameStop CEO Ryan Cohen posting a photo of himself with Michael Saylor, cofounder of MicroStrategy (MSTR), the largest corporate holder of bitcoin. However, Saylor is not currently part of GameStop’s discussion about crypto investments, CNBC reported.
GameStop shares, which rose to dizzying highs during a pandemic-era meme stock trading frenzy, trade down 16% since the start of the year as of Thursday’s close but have gained more than 85% over the past 12 months, in part, from social media influencer “Roaring Kitty,” aka Keith Gill, reigniting interest in the stock.
Below, we break down the technicals on GameStop’s chart and identify key price levels that investors may be watching out for.
Falling Wedge Breakout
Since hitting a seven-month high in early January, GameStop shares have consolidated within a falling wedge, a chart pattern that signals a move higher upon a breakout above the formation’s upper trendline.
That breakout looks set to take place in Friday’s trading session after today’s news of potential cryptocurrency investments surfaced.
It’s also worth noting that although the relative strength index (RSI) has a reading below 50, the indicator has risen from near oversold levels earlier this month, indicating improving price momentum.
Let’s identify several key overhead areas that could come into play amid further upside and point out an important support level worth monitoring during retracements.
Key Overhead Areas to Watch
Firstly, investors should keep an eye on the $29 level. The shares could run into selling pressure at this range near a horizontal line that links a range of comparable price points on the chart extending back to last year’s July swing high.
Buying above this level could fuel a move up to the $32 region. Investors who have accumulated shares a lower prices may look for exit points around this point near several peaks situated just below the stock’s January high.
To forecast a price target above this year’s high, investors can use the bars pattern tool. When applying the analysis, we take the stock’s trending move higher from October to January and overlay it from the falling wedge pattern’s top trendline. This projects a potential upside target of around $42, a level about 60% above Thursday’s closing price where investors may decide to take profits.
Interestingly, the prior trend followed an falling wedge pattern on the chart, helping provide insight into how a future move higher may play out.
Important Support Level to Monitor
During pullbacks, GameStop investors will likely be eyeing the $25 level. This price point on the chart finds a confluence of support from the upward sloping 200-day moving average, this month’s low and the stock’s September countertrend peak.
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