PreMarket Prep Stock Of The Day: GameStop

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Several issues have had spectacular rallies in 2020. Perhaps one of the biggest surprises has been the recovery in GameStop Corp GME, which is the PreMarket Prep Stock Of The Day.

Rough Start In 2020: After ending 2019 at $6.34, which was half of its year-end closing price in 2018 ($12.62), it continued lower in January while the broad market went in the opposite direction. When the broad market bottomed in March, the issue didn't find its bottom until April 3 at $2.57, which was an all-time low based on the data going back to February 2002.

Initial Catalyst: The move off that low was tepid until April 13-14 when it made a two-day move from $3.89 to $5.95 on heavier than average volume. The catalyst being that Scion Asset Management reported additional stock purchases. The investment firm, founded and run by Michael Burry, who gained notoriety by predicting the financial crisis in 2008-2009 bumped his stake to 5.3%.

From April through July, it traded in a range from that low to $6.47 but was back at the lower end of the range at the end of July at $4.01. With no major news in August, it rallied to $7.15 and ended the month just off that level at $6.88.

Another Catalyst: After the close on Sept. 21, Chewy CHWY founder Ryan Cohen raised his stake in the company to 9.98%. The issue rallied from $8.75 to $10.56 on monster volume. The momentum off the announcement took the issue into double digits for the first time since March 2019, when it ended the month at $10.20.

Microsoft Instigates Another Leg Higher: On Oct. 8, as the issue was trading at $9.22, it was halted with news pending and it was big. The company announced a multi-year strategic agreement with Microsoft MSFT to standardize its business operations on Microsoft Cloud solutions.

As expected, the issue ripped higher off the halt, reopening at $10.37 and reached $11.37 within minutes. It continued higher, reaching $13.64 before retreating to close at $13.49. The issue was unable to hold those gains and slumped to end the month at $10.47.

Full Participation In Rally: The quantum leap in the price of GameStop in November can be attributed to vaccine optimism and the overall rally in retail and apparel stocks as the reopening trade has gained momentum.

Bulls Gets Aggressive In PreMarket Trading: Being an aggressive trader in premarket trading can be rewarding if you have the capital and inclination to do so. One trader or group of traders got super-excited over the company’s "Cyber Week" deals and the anticipation that the recent launch of next-generation gaming consoles would benefit the company.

Feasting on the lower-liquidity in the premarket boosted the issue to $20.25 on 15,000 shares by 4:30 a.m. ET before attracting major sellers. In fact, in the absence of the early boosters, the issue was back at $17 by 7 a.m ET.

In volatile trading, it found a bottom at $16.88 around 11 a.m. ET and rebound off that low came up shy of the premarket high only reaching $19.42. As of 12:30 p.m. ET, it has edged up near the $18 handle.

PreMarket Prep Take: The short- and long-term merits of the company were discussed as well as a possible explanation for the unusual price action in the premarket session.

Photo via BentleyMall on Wikipedia.