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Institutions Are Buying GameStop: The Options Trades And A Technical Analysis

GameStop Corporation (NYSE:GME) has been through its fair share of controversies this year with the r/WallStreetBets community assigned credit for driving the stock over 2,400% higher between Jan. 12 and Jan. 28.

The parabolic rise was followed by a 92% fall in GameStop’s stock which was then followed by another massive 800% move north. Since then, GameStop has settled into consolidation and, in this pattern, has set up a respectable chart.

Benzinga’s Take: Although it may have been the WallStreetBets community that had the idea to stage an attack against GameStop’s short sellers, it was more likely institutions that came in to support its launch to an all-time high of $483.

In fact, institutions own 108.75% of GameStop’s 46.65 million shares, while insiders own another 19.42% — numbers that have been decreasing over time.

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On Friday, a number of options traders bet over $955,326 that GameStop’s stock is headed higher over the next two weeks and the chart looks primed for a big move.

The GameStop Chart: On March 17, GameStop’s stock began trading in a symmetrical triangle.

In a symmetricals triangle, the share price makes higher lows while at the same time making lower highs that tighten into an apex. Often, once the stock moves closer to the apex, large volume comes in and forces the stock to choose either a bullish or bearish direction.

GameStop’s stock will reach the apex of a symmetrical triangle on May 12, but over the last four trading days it has repeatedly tried to break up through the downward sloping trendline of the triangle, which could indicate a bullish break is in the cards.

GameStop’s stock is trading above both the eight-day exponential moving average (EMA) and the 21-day EMA, and on Wednesday the eight-day EMA crossed above the 21-day EMA, both of which are bullish indicators.

GameStop is trading above a support level at $161.60 and below a resistance level at $217.84. The stock has seen decreasing bear volume as it has tightened into the triangle, which indicates a jump in bull volume could be on the way.

Bulls want to see GameStop’s stock break up bullish from the symmetrical triangle and pop over resistance near $218.

If it can gain that level of support, it has room to trade up toward $275.

Bulls want to see the upper trendline of the triangle continue to push GameStop’s stock down until it loses support at $161.60. If the stock is unable to hold that level as support, it would become resistance and GameStop could then trade down toward the $100 level.

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The GameStop Option Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

  • At 11:32 a.m., Friday a trader executed a call sweep, near the ask, of 201 Gamestop options with a $390 strike price expiring on May 14. The trade represented a $30,351 bullish bet for which the trader paid $1.51 per option contract.
  • At 12:03 p.m., a trader executed a call sweep, near the ask, of 200 Gamestop options with a $160 strike price expiring on April 30. The trade represented a $388,800 bullish bet for which the trader paid $19.44 per option contract.
  • At 12:05 p.m., a trader executed a call sweep, near the ask, of 201 Gamestop options with a $200 strike price expiring on May 7. The trade represented a $119,595 bullish bet for which the trader paid $5.95 per option contract.
  • At 12:29 p.m., a trader executed a call sweep, near the ask, of 265 Gamestop options with a $170 strike price expiring on May 7. The trade represented a $416,580 bullish bet for which the trader paid $15.72 per option contract.

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

GME Price Action: Shares of GameStop ended Friday’s session down 1.48% at $173.59. 

© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights
reserved.

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