Intro
GameStop Corp stock is now slated here to go up on no fundamental news whatsoever. As we know, the company is profitable; it is now-likely to continue to be profitable going into the future. Yet, many users have noted that the stock that we like, however, is down several percentage points since that earnings call that showed profitability.
Let's look at why the downward trend occurred to 💲 G M E even though it experienced the best fundamental news practicable. Then, we can understand why good things are coming very soon to GameStop Corp's stock price:
ETFs:
The basket is defined by a group of 'hyperconnected' stocks
Cause for Hypercorrelation
💲 G M E is a stock in the meme basket. This basket is hyperconnected (and therefore the stocks are correlated, as is already and commonly known). Therefore, the same margin pressures are experienced by hedge funds regarding these ETFs as well as either stock (or both), based on runups caused by either stock (or both). This similarly-faced margin pressure is why (combined with other factors like swaps, joint ownership, and algos), in January 2021, Towel went up on no news. It's also why in August 2022, 💲 G M E went up on no news (as you can see in the chart).
For this same reason of collective-margin pressures, the January 2021 runup in 💲 G M E (and meme basket tickers) resulted in a downward spike in macro-market indices. Yet, it should also be viewed as, only when SHF 'long equities' went down was the margin threshold(s) able to be reached, and thus these moments are when 💲 G M E and the basket are able to spike. Also, in March 2021, Archegos only faced a margin call (as the Credit Suisse risk report revealed) ONLY when their long equity holdings underperformed. Thus, when they were margin liquidated, in late March 2021, GameStop experienced one of its largest [and on no fundamental news] price upticks on record, all while the macro stock market indices fell during that shock. As Warren Buffett put it: \"ONLY when the tide\" [i.e. only when margins/liquidity which means their long equities too] \"goes out\" [i.e. margin threshold reached and therefore liquidation] \"do you discover who's been swimming naked\" [i.e. literally see which funds died...where the funds dying reveal who was irresponsibly managing money on margin and/or naked short-selling stocks]
https://i.redd.it/5sa55s6oyqsa1.gif
Why this collective-margin pressure (as faced by hedge funds) matters:
As shown above, margin pressures (and in this case SHF margin 'relief') from either stock can hurt the other stock in what may seem to be an arbitrary, unfair manner. Clearly what's shown here is egregious and disgusting. Towel getting short-attacked did effectively hurt GameStop Corp stock by ETF and margins. Therefore, by margin pressures, this is why GameStop's price has been subdued even with its good news.
Both stocks, among a few others, experienced these same margin pressures. This is why the entire picture of what is going on in all of these stocks is important to understand each individual stocks' price action. As many have pointed out of the last two years, the behavior of the stocks in this current era are defined by spikey jumps. Some users have referred to this meme stock era behavior as 'jumpy', 'cyclical', 'fractal', 'sporadic but outsized', and/or 'spikey'.
However, we can analyze long durations of downward price action before routine spikes occur. We can then quantify the subsequent price runups. As you can see: after previous durations of downward pressure. These durations are routinely met with acute upward buy pressure- albeit in shorter-duration outsized price bursts. Where the + means up, and the numbers are the growth factor: high divided by the low that was made.
Here we obtain the size of the subsequent price runups, only after long durations of downward price pressure, and only during the meme stock era. The average is 420% growth factor (i.e. above a 4-bagger, every time on average), thereby quadrupling your money (assuming with impeccable timing, however).
Statistics of these routine runups that, since the meme stock era began, always occur after long durations of downward price pressure
Results: 420% growth by arithmetical mean (can't make it up):
I like to use the median-adjusted mean which is the average of the median and the mean (i.e. a 363% growth factor in this case). That said, if we assume that this current trend was the local bottom in all of these basket stocks (since we have just faced a long-duration downward price pressure period), then 363% x $22.40 = $81.31 per share for 💲 G M E (as a very-short-term expectation based on technicals alone).
Note that this analysis is technicals-only, and does not take ANY fundamentals, news, or macro trends into account - nor does it take overshoot from a real short squeeze into account. It is just showing that we should have a routine jump of 363% of its local low, regardless of what stock causes the basket pressure, within this still-new 'meme stock era'.
The question people should be asking is... when this same style of jump occurs again here (and provided that hedge funds are already facing very-ugly margin pressures market-wide) will it be enough (and when combined with similarly-timed runups across the tickers in the meme basket) to cause an actual short squeeze? [Because, as we know, no official short squeeze has ever occurred with this stock in the meme stock era (since all data reveals that shorts not were forced to close at any point, as the big margin calls were either waived and circumvented, kicking the can to right now)].
The question here is more simple: is this coming jump (that will, by technicals, happen again very soon) going to be able to force the basket to have a collective squeeze?
To answer this, I have been analyzing the 'beta' behavior of the basket stocks as they relate to the macro market.
Recently, the macro indices have been finally acting inverse to the meme-related basket tickers, and therefore, my answer is: yes. GameStop's price jump to, $81.31 per share MINIMUM, as the technicals reveal, would put the hedge funds out of their collective misery, based on their gross irresponsibility that they made worse when they continued to attack GameStop and other innocent stocks around the market.
Therefore, this would cause an actual squeeze this time around (that we have not seen yet before or after the meme stock era), by collective margins. This squeeze would obviously propel GameStop Corp's share price far above the $100.00 per share window (where it is probably anticipated for the company to raise more capital with an offering, per se, perhaps when $GME reaches the $1,000.00 per share price window).
How this relates to other moments in history: the market conditions for GameStop, etc, are now similar to Volkswagen of 2008
Volkswagen had a last-ditch short attempt prior to its by-the-book short squeeze
GameStop and the basket is now experiencing the same pre-conditions as Volkswagen experienced in 2008. During that squeeze, Volkswagen became the highest market cap company in the world.
There is a clear moment of divergence also happening today (this week)
GameStop today is projecting, by technicals and collective margins, to become the beneficiary of a basket-wide [actual] short squeeze as a result of newfound conditions again [finally] of negative beta to the macro market indices, which is the result of overall hedge fund irresponsibility (i.e., these funds have to sell long equities, and run out of margins to maintain their short liability, so the liability gets worse, and then they get margin liquidated, thereby accelerating it: selling long equities and having to buy back shares sold not yet purchased). This same phenomenon occurred in 2008, as shown above.
Cheers - We made it
TLDR:
💲 G M E. DRS. Book. Hold. Shop at GameStop.com or with the 5-star GameStop app.