Why GameStop Shares Are Rallying Again?

GameStop Video 25.02.21.

GameStop Bulls Are Squeezing Short-Sellers

Yesterday, shares of GameStop gained 104% on news that the company’s Chief Financial Officer would leave the company at the end of March.

This catalyst was sufficient enough to ignite another speculative rally in GameStop shares as traders bet that the company would become more aggressive in its attempts to improve its business.

Today, the stock continued to move higher and is currently up by about 40%. Trading activity in the stock declined over the past few weeks but now the trading volume is back as speculative traders rush to join the rally. It should be noted that there is still plenty of short interest in GameStop shares which made another short squeeze possible.

What’s Next For GameStop?

From a fundamental point of view, the change of CFO is indeed signaling the company’s intent to improve the current business situation. GameStop has completely missed the opportunity to use the previous rally to improve its financial position, although it remains to be seen whether there is any interest for the company’s shares from institutional investors.

The CFO change served as a catalyst that triggered another short-squeeze while the company’s business prospects have not changed in a radical manner after the move.

In this light, traders should be prepared to stomach huge volatility as GameStop trading dynamics will depend on the number of speculative traders who will believe that the second rally will be sustainable.

If trading volume starts to decline, the stock will likely experience a serious pullback. The previous rally showed that such pullbacks can be very fast and brutal so traders will have to pay close attention to their speculative positions.

I’d also note that the short interest has significantly declined compared to January levels while many traders got burned in the first rally and may be not ready to participate in the second attempt to squeeze the remaining short-sellers. In this light, GameStop shares may be not ready to move much higher from current levels.

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