Warning: This is a very risky play, trade at your own risk
Hello, All!
If you are not familiar with this saga, feel free to catch up:
Short Squeeze Explanation and Initial Thoughts
GME Short Squeeze What Comes Next Part 1
GME Short Squeeze What Comes Next Part 2
GME Short Squeeze What Comes Next Part 3
GME Short Squeeze What Comes Next Part 4 (Micro Update)
Before I get started I want to apologize, this will be a smaller less detailed version than I had hoped and I will not be releasing a video as I feel extremely under the weather. However, I have received a large volume of messages regarding part 4 and my analysis, so here it is.
First, let’s address something that I find very misleading: “this happened on absolutely no news”
Well, that simply isn’t true. I will mention some key things that led up to this point and would like to also quickly mention the 3-day rule. If ER is bad, you follow the 3 day rule meaning you give it 3 days to bleed before it begins to recover. This is the same for the news cycle. Even the first squeeze when Cohen was announced to be joining the board, it took several days before the market react.
Ok, so let’s talk news.
- We have passed the first potential catalyst which was the first GME hearing which unfortunately, was filled with useless information.
- Another catalyst I mentioned was today, the short interest report that was post Jan. 28th spike. Morningstar is reporting 60% and Fintel is reporting 24%. Again, the discrepancy between the two is simply based on a calculation difference using a different float. One is including synthetic longs while the other is not. This is the first mention I could find regarding the XRT discovery and how shorts may have actually essentially moved their positions into an ETF that includes GameStop. At this point, there are so many moving parts and distrust, I’m having trouble assessing what the true short interest might be. Regardless, even if we use the 24% figure and respect that to be true, this is still considered very high.
- Following iborrowdesk we can also see a significant amount of new short positions opening over the past several days, probably an attempt to short the stock but without it being reported in todays numbers.
- Chamath also expressed anger regarding how the Congressional hearing went and followed it up with this tweet. I personally believe Chamath was one of the several large buy orders today.
- Ryan Cohen also tweeted one of his infamous emoji tweets. Now, I’m not going to bother to attempt to decipher it, but when he Tweets, GME spikes much like when Elon tweets about Doge, it spikes.
- The GameStop CFO “resigns” which later news indicates he didn’t really willingly resign. This is extremely bullish as GameStop continues to make changes. If the company was losing money for years and the man in charge of money was just fired, this is a good thing.
- DFV doubled down
Ok, now let’s discuss some of these things
- The GameStop hearing was simply a joke. The next hearing will paint a more clear picture regarding data as the SEC, FINRA, and potentially, the DTCC will be present.
- Let’s talk short interest. As I have mentioned in previous parts, I have no doubt that original shorts have covered and new shorts have entered. A clear battle I have had in the comments is a lot of individuals seem to believe that shorts only re-opened their positions at the top and that’s it. I couldn’t disagree with this more. The narrative of GME being a dying brick and mortar company is alive and well, and shorts will continue opening positions all the way down. We saw many new positions open today when it was around $50. There are shorts everywhere, and they completely doubt this company and everyones willingness to hold and continue purchasing more, both for retailers and institutions.
- Chamath, Cohen, and DFV was a much needed intervention which brought back excitement and truthfully, they probably purchased more shares themselves.
Sorry had to take a bathroom break, like I said I’m feeling very unwell and apologize that this isn’t quite as good as my other posts.
Let’s talk about what happened today
I believe today was a gamma squeeze with shorts in the worst positions having to cover. I concur with this post regarding the gamma squeeze and how it started the domino effect.
I predicted that a large sum of shorts were sitting just over $200 and the AH action helps bolster that claim. We saw the price touch $200 for a moment and then get swatted down like it was a gnat. They absolutely do not want it to break the $200 mark.
But onto the important part, my predictions as to what comes next
Now, I’m about to say something very silly but the reason is I want you to make your own decision on what the most likely outcome is.
Tomorrow, either the price will come plummeting down, or it will rise to new, extraordinary heights.
- Reason for it to shoot down: There are a lot of bagholders, a lot of individuals who are simply trying to escape with at least their money back. Depending on pre-market, we could expect a large sell off at open as people reclaim their losses. This sell-off will induce a panic sell that causes everyone to exit in an attempt to mitigate as many losses as possible.
- Reason for it to shoot up: There are a lot of bagholders…who won’t be satisfied by just breaking even and will refuse to exit until it breaks $1000-$2000. Depending on pre-market there will also be a lot of people who missed the first run have less doubt in their mind for a potential second run. FOMO and sheer buying power will continue to drive the price upward.
Both of these are considering retail investors only, although the ATH price action compared to volume suggests there are significant amounts of institutional and “large whale” buyers getting in on the action. They both are also dependent on pre-market so let’s talk about that for a moment.
Pre-Market
While institutional buyers don’t necessarily need retail for this to work, it certainly wouldn’t hurt to have reinforcements, so I think they won’t begin a bull run until the market opens and retail investors have a final chance to double down while new investors have a chance to purchase their tickets.
However, if they seemingly don’t care and want to buy as soon as able then we will test that $200 resistance. If that is broken…this is going to be absolutely wild. The domino effect will continue upward chasing the shorts who entered at the very top. It would be wise for these shorts to cover prior to it reaching them as they could still take profits and walk away with a significant sum of money. This will propel the price extremely high at which point nearly all shorts would have exited.
During Trading Hours
Again, completely dependent on pre-market, but I still expect a decent sell-off in the beginning of the day as bagholders escape with breaking even happily. If we open above the $200 mark and the selloff does not appear to be driving us below, I expect the shorts who entered their to cover and this reaches parabolic heights.
Price Targets
Well, I first want to talk about the infinite squeeze notion. I agree with the sentiment but not for the same reasons most users post about. Here’s the thing, everyone still considers GME to be a dying brick and mortar retailer aside from few longs such as myself. That narrative is slowly changing as more and more individuals start to see the significant changes being made within the company. So long as this mentality lives on…so does repetition.
I expect this squeeze to conclude sometime this week, perhaps even tomorrow. What’s unique here is we have all now lived through the first one and we will make decisions accordingly, IE taking profits or covering earlier.
But on the way back down….shorts will open new positions….again.
A new catalyst will arrive….again.
And we will squeeze…again.
I’m not sure how many times this will happen, but I think after 3/25 ER when Cohen globally explains the changes being made and the plans for the company, the narrative will begin to change on GME’s business. Until the narrative changes, I expect shorts to continue re-entering at dangerous positions. $50 sounds like a fantastic place to short if you believe this is a dead company, but the market sentiment is changing rapidly on the potential of this company. Once shorts are only entering at ridiculously high numbers, then we will finally see the end of the GME saga.
I think a second squeeze will be evidence enough to shorts to not enter at such low numbers, however, greed and doubt goes a long way. So it’s very possible this is the final squeeze, but I’m not holding my breath. I will address how I plan on playing this in the next section, but first, some price targets.
So long as we break the $200 resistance, we will have many short positions above that level that will close to avoid getting caught in the red as well as gamma squeeze mechanics at play. That being said, I could see $500 being possible as early as tomorrow. Now the top is so difficult to predict because one of the largest factors is the most unpredictable; the people. Many people were burned by GME and many others have serious FOMO. If there is large volume, then that will be my indicator that people are piling in all over again. If this is the case, I see $1-$2k being possible. If bagholders simply want to exit and take their money back then I think $500 might be the dream peak.
So whats your play Hooman?
Well, as I have said before I am long on GME. So I will be trimming on the way up and leaving some just in case it continues to parabolic heights. I will then re-enter when I believe we hit the bottom which I feel confident starting to re-enter at $70 adding more on the way down. I will then hold tight for another potential squeeze and repeat this process until finally, the GameStop narrative has changed and I could leave my shares along for several years.
Again, I do apologize
I know this isn’t quite as good as my previous posts, but I wanted to update everyone who was asking me to provide them with my analysis. Part 5 will be coming regardless of what happens tomorrow as I stated numerous times, I don’t think this story is anywhere near over, not until April do I think we will start seeing it slow down.
TL;DR: Today was most likely a gamma squeeze coupled with some shorts covering. There were significant catalysts and whales to propel this thing. I don’t think the GameStop story is anywhere near over. I’m sick sorry this was choppy writing compared to other posts.
Disclaimer: I am not a financial advisor, I am long on GME, this is a risky trade, thanks for reading.