Why GameStop was flashing bullish signs when it was a $5 stock

Yahoo Finance's Jared Blikre and Michele "Mish" Schneider, Marketgauge.com partner and director of trading research & education discuss the sudden rise of Gametstop earlier in year and where the stock is heading.

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Video Transcript

MICHELE SCHNEIDER: Well, you know, let's go back a little bit on the GameStop because people-- people think this isn't technical. It's so highly technical. If we go back to January of 2021-- and I'm actually going to put my glasses on here so I can make sure I see it--

JARED BLIKRE: You got it.

MICHELE SCHNEIDER: --well. OK. [LAUGHS] If we go back to there, there's-- if you look at the moving averages, they were all sort of converging. Remember, we talked about the 200-day moving average, we talked about the 50-day moving average, and we talked about the 10. And right there, we were starting to see the price action. And it's a little bit hard to see because you've got the volume bars kind of interfering there. Ah, that's better. That's better, Jared. Well, if you go-- where are we? We're going to go to 2021. There we are.

JARED BLIKRE: Yeah, this-- so this right here is September, and we're going into very early 2021 right here.

MICHELE SCHNEIDER: Right. In early 2021, it looked like it was going to hold the 200, and it started to clear the 50. And once it cleared the 50, for those who were paying attention also looked at the volume patterns. That showed that we had a sea change. We had a trend change or a phase change in this particular stock.

And of course, the fundamentals hadn't really come out yet about, A, we didn't know necessarily-- and when I say we, us older generation who hadn't really started following these mean stocks yet, didn't know that it had become a mean stock. But also, just in terms of I was seeing "out of business" signs on GameStops here in where we live. And yet at the same time, they were, at that point, starting to talk about going to more online gaming.

So even if you were living under a rock and you just happened to look for things that were clearing their 50-day moving average, that was your first indication to go long. And it never really broke-- it broke down under the 50 a couple of times up and down, but it never broke that 200 again. So now let's go to more modern times right here, right where we are at right now. And if we look at where we're at right now, again, we're under the 50, we're under the 10, but we're still well above the 200.

Now, this is pretty much broken down, but we're heading into some support here. And if you look at the slope, by the way, on the 50-day moving average, notice the slope is declining. That tells us also that this caution phase or this warning phase is accelerating. So you want to see one of two things happen. You want to either see this thing get back over, say, 205, 206, or it's possible we're going to get down closer to 150.

And then if we break down under there, I'd be looking to see what happens closer to the 200. But clearly, you can see whatever attention this had in terms of volume. If you look at your volume indicators, it's just kind of gone off to the flat line here. So it's certainly not the darling right now of the mean stock traders. And for that alone, I'd be looking for volume and one of those price patterns to emerge.