GameStop (GME) shares rose nearly 8% in extended trading on Thursday after reports indicated the video game retailer is considering investing in bitcoin (BTCUSD) and other cryptocurrencies. This potential move was reported by CNBC following Thursday’s closing bell.
The consideration of cryptocurrency investments follows GameStop CEO Ryan Cohen sharing a photo with Michael Saylor, co-founder of MicroStrategy (MSTR), the largest corporate bitcoin holder. However, sources indicated that Saylor is not involved in GameStop’s discussions about crypto at this time.
As of Thursday’s close, GameStop shares have decreased 16% since the start of the year but are up more than 85% over the last 12 months, partially due to social media influencer “Roaring Kitty,” also known as Keith Gill, reigniting interest in the stock.
Technical analysis and price levels
Since reaching a seven-month high in early January, GameStop shares have consolidated within a falling wedge pattern, which typically signals a potential upward breakout. Following Wednesday’s news about potential cryptocurrency investments, this breakout may occur during Friday’s trading session.
Although the relative strength index (RSI) remains below 50, it has improved from near oversold levels earlier this month, suggesting a positive shift in price momentum.
Investors should monitor the $29 price level, where selling pressure may occur near a horizontal line connecting previous price points from last July’s swing high. If shares trade above this level, it could lead to movement towards the $32 region. Investors who purchased at lower prices might look for exit points near this level, which corresponds to several peaks just beneath the stock’s January high.
To estimate a price target beyond this year’s high, analysts can apply the bars pattern analysis, projecting a potential target of around $42, approximately 60% above Thursday’s closing price. This could represent a point where investors consider taking profits.
During potential pullbacks, GameStop investors are likely to focus on the $25 support level. This price exhibits strong confluence, supported by the upward sloping 200-day moving average, this month’s low, and the stock’s September countertrend peak. The company’s exploration of cryptocurrency investments, particularly bitcoin, has already caused shares to increase as much as 20% in extended trading.
Despite the interest, GameStop may ultimately choose not to proceed with these investments, as the firm is still evaluating whether it aligns with its business model, according to one source. Previously, in 2022, GameStop introduced crypto wallets for managing cryptocurrencies and nonfungible tokens, but discontinued the service in 2023 due to regulatory uncertainty.
Ryan Cohen, who co-founded Chewy and joined GameStop’s board in 2021 after purchasing shares in 2020, has been focused on modernizing the retail chain. Under his leadership, GameStop has aimed to cut costs and streamline operations for profitability despite ongoing challenges in adapting to evolving consumer spending habits. As of November 2, GameStop reported a cash reserve of $4.6 billion and has actively sought investments with these funds, according to a December securities filing.
Companies contemplating adding bitcoin to their balance sheets may follow MicroStrategy’s example, which has made substantial investments in bitcoin in recent years, transforming into a significant bitcoin holding entity.
In December 2023, GameStop’s board sanctioned a new investment policy granting Cohen, along with two independent board members and necessary staff, authority over the company’s portfolio of securities investments, requiring adherence to the policy’s guidelines or approval by committee or board voting.
Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.
Featured image credit: GameStop
