GameStop is one of the most popular meme stocks that made headlines this year. It bounced from close to zero to over $400 in an epic short squeeze that generated billions in losses for hedge funds.
The retail trading community acted in unison as it used the derivatives market to buy call options on the GameStop and other meme stocks. By the time that the underlying started to move, a gamma squeeze pushed the stock price even higher.
In a gamma squeeze, those selling call options were forced to cover by delivering the shares at expiration. That is, they were forced to purchase the shares in the open market, thus further fueling the bullish rally.
Long story short, GameStop’s squeeze is an epic one and made headlines in 2021. It is the stock responsible for the rise in the meme stocks and still trades at levels that do not justify its valuation. Yet, speculators on GameStop and other meme stocks do not care about valuations – we may say that valuation is the last thing that comes to mind.
From a technical perspective, GameStop stock price nears important support. A bounce from the dynamic level should put pressure on a new higher high. Bulls may want to go long with a stop at $135 and a target of $350.
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