We're Updating Strategy for GameStop and Another Investment Catching Fire
Earlier this week, I listed my reasons for buying video game retailer GameStop (GME) . Shortly afterward, on "TheStreet Pro Podcast" with Chris Versace, I laid out my plans for managing that trade in greater detail.
Even though only a few days have passed, a lot has happened since. It’s time to update our game plan for GameStop, as well as our strategy for trading silver. Silver caught fire shortly after we entered the trade, and now GameStop has done the same.
Silver
Let’s start with silver. Our initial entry was $26.25 (marked in green below), and our preliminary target was $29.75 (marked in blue below). When that target was hit on May 16, 2024, we took profit on half of the trade and raised our stop to $29.25 (marked in red below) on the remainder of our position, as laid out in our game plan.
Via TradingView
Then the trade fizzled after a bearish double top formed (shaded in yellow above). Our ultimate target of $34.25 was never achieved. Instead, our stop was hit for a profit at $29.25. Our entry was $26.25, and our average exit was $29.50.
What’s our next move for silver?
I have no idea if silver will return to its breakout point (marked by a red dotted line above), but if it does, we will be buying again at $26.25 and our targets will be located at $29.75 and $34.25. Our initial stop will be located at $24.25. This is very similar to the silver trade we just closed.
GameStop
On Tuesday, we recommended buying GameStop in the $23 (marked in green below) area, with a stop at $15 (marked in red below). By Wednesday, the stock climbed above $33.
Via TradingView
In Tuesday's article, I explained my reasoning behind the trade. On Tuesday afternoon, in a podcast with fellow TheStreet Pro contributor Chris Versace, the full game plan was revealed.
Instead of using two targets, as we did with silver, the GameStop trade requires three targets. The first target of $31 represents a one-to-one reward/risk scenario, as the reward of $8 matches the risk of $8.
Since the first target of $31 has been hit, we are raising our stop from $15 to $23.
Our second target is $45, just below June 7 high ("Point A" above). The final target is located at $60, below the May 14, 2024 high of $64.83 ("Point B" above). Since there are three targets, exit one-third of the position at each of the three targets (marked in blue above).
Right now, our worst-case scenario is a small win ($8 profit on one-third of the trade, breakeven on two-thirds). If our next target of $45 is reached, we’ll close the second third of the position, and raise the stop to $31.
At the time of publication, Ponsi was long GME.