Gamestop 31/01/2021

As most of you know by now - there is an ongoing battle playing out between

retail traders ( lead by Wallstreet Bets ) VS Hedge funds, on Gamestop.

We have always known and educated the public on the role of market manipulation in the financial markets, and while it is being done covertly behind the scenes by the hedge funds of the world, manipulating the order flow/news, to see an army of retail traders banding together ( publicly on the basis of free speech ) to beat Wallstreet at its own game - has definitely caught our interest.

I must say I'm impressed and moved by intent, strategy and solidarity behind this movement to 'screw' the hedge funds - and it would be refreshing to see the 'little guy' beat the 'Big guy' for a change.

Having said that there will be longer term consequences/implications on the way the game is played ( Power of social media ), which is why we are seeing alot of coverage in the press from politicians, brokerage firms, hedgefund managers, individual retail traders all reacting to the situation.

This is still a developing story so lets pull out the chart ( 31/01/2021 ) to see how the battle is playing out.

It is incredible to see this type of volatility on a 60minute chart.

We are talking about 300$ moves within an hour.

As far as I can tell - so far we are consolidating within a Triangle after price exploded to 477.06 ( COP ), from which we retraced off from.

A breakout ( on either direction ) should give us an early indication on who is going to be the winner come monday.

It is almost a certainty that GME will eventually trade back to where it used to be trading.  ( probably below 100$ ) especially if nothing really changed in terms of its fundamental value. 

However, in the short term - price is ALWAYS determined by Demand and supply interaction between market participants, which for the most part,  was dominated by Hedge funds. 

Only this time - there are Hedge Funds are caught in a short squeeze, which began first as a gamma squeeze ( on call options ), started by the guys from Wallstreet bets.

Due to the small float and the stock being more than 125% shorted ( TSLA at its peak had only 40% short interest ), there is a chance for GME to break out to the upside as well, if the short squeeze continues.

There will be significant resistance at 534.12 - 551.73 ( OP expansion cluster ).

Depending on how things play out - 795 ( XOP expansion cluster )

 Joe DiNapoli and I did some videos awhile back that discusses the mechanics of how markets work, market manipulation, and the role of High Frequency Trading in today's market, all of which is laid bare by this developing story on GME.

You can watch it here should you be interested.

 The Mechanics of how Markets Work?

Will be creating more content on this developing story in the coming weeks so stay tuned!

P.S. Personally I'd love to see the little guy win for a change. Having said that - one should refrain from making trading decisions emotionally. Unfortunately, this is the frame of mind that most retail traders operate from, which I feel for. I Fear that in the end - retail traders will be caught holding the bag ( those late to the game ).

Professional Trading should always be done with risk management in place with accordance to one's trade plan (Entry, Stop, Profit Target), and there are specific rules a Professional Trader lives by. More on that later.

 As a side note - ES futures reacted off Q COP node last week which should put downside pressure on equities this week.

ES-056 Quarterly chart