GME shot up by 69% before peaking at over a 100% gain. Seeing this unfold brought back memories of the 2021 short squeeze. But what’s driving this sudden spike, and how should day traders approach it? Let’s dive into the blog and talk about it!

Image via Warrior Trading

Hey everyone, Ross here! The stock market brings surprises every day, and today’s surge in GameStop (GME) was one of those jaw-dropping moments.

The Catalyst Behind GME’s Rise

The uptick in GME shares Tuesday can be attributed mainly to a meme. Yes, you read that right—a meme. Roaring Kitty, a key figure during the 2021 GME frenzy, posted a “things are getting serious” meme on Twitter. The meme depicted a person leaning forward from a relaxed position, signaling heightened attention or action. This meme alone was enough to send GME’s stock soaring 70% in no time.

Why This Isn’t 2021 All Over Again

I don’t believe that this situation will mimic the chaos of 2021. Back then, big money shorts were caught off guard. Today, they’re more prepared and experienced. They know the tricks to keep the stock in check. My gut feeling tells me that they will succeed in controlling the situation if needed.

Technical Analysis

When I looked at GME’s daily chart, I had to consider the effects of the company’s 1:4 stock split. Before the split, the stock price would have been around $120, a respectable jump from its previous levels. However, it’s still far from the $500 it reached during the 2021 surge. GME has crossed the 200-day moving average (MA) multiple times. It went above it, dipped below, and repeated this cycle several times. This pattern shows that the 200-day MA is not a reliable indicator for GME.

Morning Observations

I noticed multiple sellers stacked at the $25 level during the pre-market. This heavy resistance dissuaded me from buying for a breakout. A subsequent flush and rebound around $25 confirmed my doubts. I started looking for support around $26.20, where a hidden buyer was absorbing shares.

Getting Hands-On

I took a couple of trades around the $26.20-$26.50 mark and managed small profits. However, the stock’s volatility made it challenging to trade. There were five consecutive up-halts and one down-halt, reflecting extreme volatility. Due to the stock’s large float and excessive movement, managing risk was difficult. Larger positions could lead to substantial losses, making it a high-risk trade.

Missed Opportunity or Smart Decision?

In hindsight, buying at the first candle making a new high would have been a lucrative move. However, a previous high-volume red candle cast doubts, making me hesitant. This shadow of volatility, coupled with a lack of a clear catalyst, held me back from taking larger risks.

Final Thoughts

I ended the day with a small profit of $555.48. While it might seem insignificant compared to others’ gains, maintaining discipline is crucial. Avoiding emotional trading—FOMO (Fear of Missing Out), regret, and black-and-white thinking—keeps me grounded.

By focusing on quality setups and managing risk, I’ll likely have a better week ahead. Though today’s trades didn’t yield enormous profits, they were disciplined, which is a win in my book.

So, if you didn’t crush it on GameStop today, don’t worry. It’s just one day. Managing risk and maintaining discipline are key in day trading. Always remember to stay focused on the process first.

While chasing a runaway stock can be tempting, discipline and risk management should always guide your trading strategy. GameStop offered a wild ride, but smart trading kept me out of potential trouble and netted a modest gain. Stay disciplined, focus on the process, and happy trading!

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