GameStop Reversal? Short Squeeze Hits an ‘Outside Day’ of Epic Proportions

GameStop just had one of the craziest trading sessions in recent memory.

The video-game retailer entered the session with a year-to-date gain of over 1,600 percent, propelled by a short squeeze of epic proportions. Seconds after 10 a.m. ET, it reached a high of $483. GME then reversed and plunged 77 percent to $112.25 by 11:25 a.m. before bouncing.

That translated into a market cap loss of almost $26 billion in just 85 minutes: equivalent the value of entire companies like Autozone (AZO) and Lennar (LEN).

GameStop GME), logarithmic chart, highlighting outside day.

GME closed down 23 percent, but that number doesn’t capture the drama of the session. At one point, the heavily shorted stock soared 27 percent above its previous session’s high. Its low was 55 percent below the bottom on Wednesday. That translates into a giant outside day, which is often considered a reversal pattern.

Several other stocks that had jumped on short squeezes also fell:

  • Blackberry (BB), which had quadrupled in value on the year, plunged 42 percent.
  • Express (EXPR), which had spiked about 1,000 percent, lost 51 percent of its value.
  • Bed Bath & Beyond (BBBY), which had tripled, slid 36 percent.

This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 29/01/2021.

David Russell
David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.

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