The GameStop stock shows promising signs as it forms a bullish pattern known as a golden cross. According to technical analysis, if the stock continues to trade within its current range, a golden cross is expected to develop in the next day or two.
Currently, GameStop Corporation (NYSE:GME) is trading slightly lower after experiencing an 11.17% rise between June 26 and Wednesday. This increase has resulted in the formation of a bull flag pattern for the stock.
In a bull flag pattern, the stock experiences a sharp rise, forming the pole. This rise is then followed by a consolidation phase where the stock moves lower within a channel or forms a tightening triangle pattern.
For bearish traders, it is important to follow the trend until there is a shift. In this case, if the stock continues downwards within the established channel, shorting the stock at the upper trendline and exiting at the lower trendline may be a strategy to consider.
On the other hand, bullish traders should watch for a breakout above the upper descending trendline of the flag formation. An entry signal would be confirmed with high trading volume. When a stock breaks above a bull flag pattern, the measured move higher is typically equal to the length of the pole, which can be added to the lowest price within the flag. This suggests that if GameStop breaks out bullishly, it could rise towards $27.50.
To confirm the validity of the bull flag pattern, it is crucial to see the stock break out from the downward sloping flag on higher-than-average volume. This indicates that the pattern has been recognized and could confirm the start of a new uptrend.
It is important to note that a bull flag pattern is negated if the stock closes below the lower trendline of the flag pattern or if the flag falls more than 50% down the length of the pole.
The analysis suggests that GameStop has the potential for a 12% rise if it breaks out bullishly from the flag formation. Bullish traders should keep an eye out for a breakout and monitor volume to confirm the pattern recognition and new uptrend.
In conclusion, GameStop’s stock is currently displaying a bullish pattern with the potential for a golden cross formation. Traders should carefully monitor the stock’s movement and volume to determine the best entry or exit points.
