As the community of traders reckons with many a crazed new-comer and their love of gamestop GME and AMC we have to be glad that people are being more and more interested in trading. However, for many of us, trading isn't to make a statement: it isn't to make a point, to stick it to someone or to prove how resolute you are. For me at least, trading is the end result of an exciting process of creative research, imaginative planning and positioning, using algorithms that I've written to try to get a well-timed entry, and the satisfaction of not worrying about each pricepoint thereafter -- knowing that
I like the stock because of the sub-industry position in our future as a society
I like the stock because of the particular company's financials relative to any similar sub-industry member
I feel that management, both based on metrics and intuition from listening to the researchers, COO, CEO, CTOs at the company actually believe in what they are doing.
I feel that the timing is right from a technical perspective, relative to events, from an industry-cyclic standpoint, and broader market threats.
Thus, in summary, my "advice" to anyone would be: buy a stock because you find it compelling, you can imagine what they do 5 years from now and its more than what they do now, you know the company is healthy, there aren't many threats, and you wouldn't be upset if it lost 10% because you are confident in its future. .
If you feel this way about GME, then that's great. But its unlikely that you will make it through the above points without a bit of heartburn -- especially given the following: EARNINGS COME NEXT WEEK . This is a time to ask yourself the following question: what is a fair price? Did 100% gain exceed your fair price? How about 500%? I'll leave that to you.
Today lets look at GME's Volume using the OBV Correlation Indicator.
*The OBV Correlation Indicator can be set to correlate with any reference. I've chosen QQQ * Secondarily the direction of chart stock's OBV is encoded with color: So if the histogram is negative AND red this means the correlation is negative and the obv direction is downward for GME. * Lastly price correlation is encoded with a line, and price direction with color. Thus a negative red line means the price directions are also anti-correlated and price is downward.
In the case of GameStop we see the natural pre-earnings pattern.
A lower price correlation than usual to the broader market
A lower volume correlation than usual to the broader market.
But we see something else here. We see accelerating negative correlation in Obv of GME and the index as well as obv oscillator decreasing at an increasing rate.
This is all one moment in time. However we have to remember earnings are about rectification: rectifying the price with perception, rectifying expectation with guidance, and also rectifying expectation with position --- i.e., a time to take profits.
Ask yourself this: Do you see whatever will be said by management as being something to sustain a 1,000% increase in price? Do you imagine a buyout would be offered at 1,000% its price at last earnings?
This week: Watch the relative volumes, watch the decoupling of volume and price using this indicator (OBV correlation indicator), and if you are holding GME, consider looking like a genius and selling now.
Bear in mind you're not recognizing that guesstimate "1000% gain" is, at least partially, due to the fact that shorting has caused the abnormally low floor to begin with. Without such intentional malicious manipulation, the gain/upside wouldn't seem to be so extraordinary. Proper perspective has to be maintained for an honest review of what's really taking place.
@obsidianram I respectfully disagree. The issue is one of eventual valuation. If your argument is that it was manipulated and undervalued in January and someone had asked you what a fair price was would you say “double it” given the business model?
(In January, at 18 dollars, PE was negative with PS above industry average by far. )
We are well beyond “double”.
obsidianram
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@BradfordFournier, Remeber what their business model is, and that the rumblings of a pandemic had already began as early as November/December. Analysts just completely botched their guess on the impact it was going to have - and the full effect we eventually saw by March. With the lockdowns, such a gaming-centric business came into its' own and people were chomping at the bit for video games, movies, consoles and accoutrements to go with them just to stay sane. GME's true value suddenly began to show, although the shorting was already well underway.
samandreasfault
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Good work. I set my SL. In since $50
mushroommilitia01
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🌈 🐻
casanova1012
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fantastic write up
HabitualLineStepper_
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A fair and rational analysis. That said, this is a meme stock with a legion of retail investors behind it so anything is possible.