GameStop Stock Looks to Be Entering a Short Squeeze Set Up

GameStop (NYSE:GME) stock is once again proving its detractors wrong. I’ve certainly been among those detractors. And I’ve been proven inaccurate in judging GameStop’s trajectory. Once its run seems to have reached an end, it surges back to life. Its volatility is unpredictable. 

That’s positive news for retail investors as the company once again springs back to life. It seems that Wall Street opinions don’t weigh that heavy here. GameStop fans should rejoice as short-term gains look increasingly likely for retail investors with a penchant for risk. 

Same Old Song and Dance

Wall Street remains certain that GME stock must falter based on fundamental arguments. Retail investors remain ardent that those who have shorted GameStop will be proven wrong. That’s setting up another potential short squeeze.

Wall Street, for its part, is continuing to offer the same advice: Prices are too far disconnected from fundamentals. Wedbush analyst Michael Pachter repeated that idea after GME shot up 29% on May 26. He noted that “[shares] remain at levels that are completely disconnected from the fundamentals of the business due to ongoing support from eager retail investors.”

His opinion mirrors that of analysts since the meme stock phenomenon began. Right now, it makes sense to side with retail investors. There is simply too much momentum and too many catalysts to ignore. 

That means retail investors are likely to be vindicated, at least for the short-term. 

Short Squeeze Setting Up

GME stock currently carries short interest nearing 24%. Combine that with dramatically increasing prices on volume that rose from 2 million to 10 million shares traded between May 24 and May 25 and a short squeeze could be underway. 

In order for that short squeeze to occur, GME stock will have to continue to appreciate in price, forcing the hand of those who have shorted it. 

All it needs is for current catalysts to trigger a further influx of capital. And there are plenty of such catalysts. The firm officially launched its digital asset wallet. That will allows users to trade using cryptocurrency. Additionally, the company’s non-fungible token (NFT) marketplace is scheduled to launch in the second quarter. 

Those factors could be sufficient reason for retail investors to pump capital into GME. Further, earnings are coming soon and the shareholders will put a stock split to vote, as well. 

Takeaway on GME Stock

Fundamentally, GME stock should trade around $70. Wall Street is not going to back off of that notion. But retail investors aren’t going to back off of the idea that GameStop has too many catalysts in its favor now and in the near term. They like their dog in the ongoing retail investors versus Wall Street fight. 

Short interest is high and retail investors are dug in. GameStop may already have entered another short squeeze. It’s impossible to predict. But retail sentiment is what it is and fundamental arguments won’t change that. Another piece of positive news may be all it takes to trigger another short squeeze. Wall Street can argue fundamentals until its blue in the face, but retail investors chasing the next GameStop short squeeze don’t care. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.