GameStop surged as much as 78% on Friday as investors looking to thwart short-sellers piled further into the stock and triggered a trading halt.
The video-game retailer’s shares have nearly quadrupled in January after changes to the company’s board of directors sparked a massive rally. The upswing intensified this week as short-sellers dumped their bearish positions and an increasingly large crowd of retail traders cheered the stock higher.
The initial surge on Friday triggered a circuit-breaker trade stoppage around 12:40 p.m. ET. Shares resumed trading soon after, fell slightly, then resumed their climb to new highs.
The fight between shorts and bulls entered a new stage on Thursday after Citron Research managing partner Andrew Left posted a video highlighting five reasons why he expects GameStop shares to crash to $20. Left initially planned to stream himself explaining his short position, but attempts to hack into his Twitter account forced him to record the video.
The managing partner slammed GameStop’s elevated valuation and dependence on physical locations in the nearly 7-minute-long video. Left also called out the traders doubling down on the stock, urging them to “know who’s on the other side of the trade” and respect their experience in the market.
“This is a failing, mall-based retailer,” he added. “The amount of people who are so passionate about putting GameStop higher, not because of any fundamentals, just shows the natural state of the market.”
Members of the WallStreetBets subreddit are unfazed. The forum – known for its crude markets-based humor and celebration of triple-digit portfolio swings – remains largely bullish on the stock and features several posts chiding Left for his bearish position.
Commenters urge each other to maintain “diamond hands” and hold their GameStop shares indefinitely. Others call on retail traders to join them and lift the stock even higher.
While it remains to be seen who will win out in the end, some indicators suggest the bulls’ party is coming to a close. The Relative Strength Index for GameStop shares – a measure of the stock’s momentum – sits just below 80 following Thursday’s 10% climb. Readings above 70 suggest the stock is overbought, and the index hasn’t landed below the threshold since January 12.
GameStop closed at $43.03 on Thursday, up roughly 123% year-to-date. The company has two “buy” ratings, two “hold” ratings, and one “sell” rating from analysts.
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