Key Takeaways
- GameStop shares rocketed ahead of Tuesday’s opening bell after the video game retailer said it had successfully sold 45 million shares worth roughly $933.4 million.
- The sale helped the company capitalize on a recent social media-fueled meme rally in its share price that saw the stock soar around 135% over a two day period earlier this month.
- Traders may book profits in GameStop shares around $27, an area on the chart where a May 13 gap sits in close proximity to a key horizontal line connecting a series of price action over the past 19 months.
GameStop (GME) jumped more than 25% in premarket trading on Tuesday after the video game retailer said it successfully sold 45 million shares worth roughly $933.4 million, helping it to capitalize on a recent rally in its shares.
The company, which saw its stock soar around 135% over a two-day period earlier this month, initially announced the share offering on May 17, several days after the peak of the social media-fueled rally, saying at the time that it planned to use the proceeds for general corporate purposes, such as investments and acquisitions.
Although the company did not disclose the sale price of the shares, it said it executed the offering at-the-market, meaning it sold the shares at the prevailing market price, allowing the retailer to cash in on a portion of the meme-driven gains.
In recent years, the struggling brick-and-mortar video game seller has made several attempts to reinvent itself as consumers shift away from gaming consoles to digital downloads and apps.
Investors will gain further insight into the company’s financial position and outlook when it reports fiscal first-quarter earnings after the closing bell on June 5. Earlier in May, GameStop said it expects net sales in the period to range between $872 million and $892 million, compared with the $1.237 billion it reported in last year’s corresponding quarter.
Monitor This Key Level for Potential Profit Taking
Since temporarily spiking more than sixfold from their late April low, GameStop shares have given up about 70% of those gains in recent weeks, with the price falling towards a multi-month downtrend line. Interestingly, Tuesday’s projected price rally coincides with the 50-day moving average (MA) crossing above the 200-day MA on Friday to flash a golden cross, a pattern often interpreted as marking the start of a new move higher.
In upcoming trading sessions, investors should pay close attention to the $27 level, an area on the chart where traders may book profits near the May 13 gap, which sits in close proximity to a key horizontal line connecting a series of price action over the past 19 months.
GameStop shares were up 26.3% at $23.99 about two hours before Tuesday’s opening bell.
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