GME Magnum Opus DD: past, present, future

DD 👨‍🔬

Apes, I have excellent news. I was sitting on the toilet listening to Fifth Harmony attempting to take my 4th shit of the day. After having trouble, my good friend WD40 came to the rescue. Minutes later, a fully cooked chicken tender popped right out of me. Now I know what you’re asking yourself, so I’ll save you the trouble: yes, it was still warm. Now, I took this as a sign as any logical ape would do. I realized that MY WIFE HAS BEEN FUCKING THE MAILMAN. So I graciously added the mailman to the long list of my wife’s boyfriends by paying his taxes, giving him a welcome to the family cake, and allowing him to take my bed. In exchange, my wife’s new boyfriend graciously allowed me to pay his rent for five months. So yeah, you could say I’m living the good life right now.

A few weeks ago I made a post where I tried to decipher GME’s potential future movements based on its past. Before reading this post, please see that post as you will be very confused if you don’t. This post is going to be a continuation of that post, which attempted to use the past to make sense of where we are now. This post will try to use the past and the present to try to predict where we could be going in the future.

Before reading. I warn you, this is long. Many of you who follow me have seen my previous posts that are long. Well, this is a new level of long. This is like my wife’s affair with the mailman long. This is my magnum opus, so if you bear bull with me, I appreciate you. This is not financial advice, I am not a financial advisor. There’s a TL;DR at the bottom that is surprisingly short, which shows how detailed and convoluted this all is… enjoy!

Introduction

Note on using the past

Before going further, I want to emphasize that correlation does not equal causation, dates should not be taken as absolute, and the past does not always indicate what the future may do. I am only posting this because I see similarities and wanted to share my findings. Though traders, historians, and economists often use the past to predict the future (i.e. yield curves, interest rates, recessions, etc.), these are simply correlations and do not guarantee or prove future price action.

So, why do I use the past to try to predict the future? I use it for many reasons. First, as I said earlier, most analysts/traders use it too. Similar to technical analysis, because other people use it, stocks often follow those patterns simply because others use it. We also know that it is a common sentiment that the past price of a stock can be used to predict its future (on a more complicated level, people use Fibonacci indicators to take advantage of this).

Most importantly, I believe that the past price of GME can help predict the future because GME is in a unique position. GME has been the victim of abusive shorting for many years now. I believe that the failure to deliver cycle has been in effect since last April when GME went below $3. I am guessing that hedge funds used naked shorting believing that they wouldn’t get screwed because it would bankrupt the company and they wouldn’t have to unwind those naked shorts. They probably thought that at the worst it wouldn’t go bankrupt and they’d take a slight loss. As we all know, GME is not bankrupt, so I believe that the shorts have been in a nasty failure to deliver cycle that has been fractally repeating since last year (see the research article about this cycle, it’s absolutely genius what this man did but sadly I don’t have the link). Moreover, as someone who has looked at GME for many months now, I see patterns in its chart that repeat constantly (bull traps at 11am or 1pm, giant dips at open followed by recovery and then dips during power hour, triangles forming after open rally only to be broken and not pan out, etc. (I could probably make a separate DD about these topics alone)). Therefore, I believe that we can use the past of GME to predict the future.

Again, I could be wrong, this could all be a correlation. This is simply my opinion based on my own research. So, please, save your comments regarding how the past cannot predict the future and stuff like that because I am well aware of that and am making this note so that others are aware too. I am just sharing my findings and thoughts, so please do not treat them as fact. Though this does contain my thoughts on the near future of GME, it also has some useful DD that you will still find useful even if you do not agree with my analysis/prediction. I am not a financial advisor, this is not financial advice. With that being said, let’s enter the danger zone.

Quick summary of previous post

Again, I encourage you to read my previous post first but I am going to give a short synopsis of it right here for more context.

Here is the large view of where we are looking:

These charts show the similarities between the green and red squares shown above:

The crux of this post is analyzing the blue square and trying to find similarities between today’s price action and the blue square to help give a possible idea of where the stock could go in the future. This post is filing in the gap of my last post by using early January (blue square) to predict where we could be going in the coming weeks.

So, my previous post discussed where we’ve been (red, blue, green squares). This post will discuss where GME could go in the future. My hypothesis is that because the red square is similar to the green square, then the blue square can help predict where we are going, which will then lead to the MOASS (again, this is all conjecture and my opinion).

Analysis Starts Here:

As I said above, this analysis will cover where the price of GME could be going based on the blue square above. This analysis is based on the hypothesis that because the red square behaved in a similar pattern to the green square, that the blue square will be a predictor of the period before the MOASS (again this is all conjecture, so do not take it as fact, this is my opinion based on my findings). This blue square analysis will cover comparisons based on three different views:

1. Medium view: A view that analyzes the blue square (December to early January) to try to predict where we could go soon

2. Small view: A view that analyses a very small time frame (early January) within the blue square to help us give a prediction on where we could go in the very near future

3. Extra Big view: My first post can be construed as a big view because it covered the red and green squares. The extra big view will cover four months before the squeeze and the previous four months

1. Medium view: using the blue square to predict where we could go soon:

Here is the blue square from my original chart at the top. This square represents the period before the first squeeze:

As you can see, it starts with a slight increase in price and volume, then a decrease in volume and a consolidation in price that is followed by a rapid and monumental increase in price and volume, which then kicks off the squeeze. This next chart picks up where the green chart left off (4/5). I believe that this chart is substantially similar to the blue chart and indicates that we are repeating old patterns:

Comparing this chart up until 1/8, we can see some very stark similarities, which I will get into in more detail below. Because of this, I believe that GME is currently repeating the blue square pattern and that we are in the same position now as we were in at 1/8. Therefore, I believe that 1/11 (a Monday) could be similar to this coming Monday. This will be detailed below, again it is my opinion, not fact.

2. Small view: comparing early January to now:

So, my blue square starts at around the middle of December. To give us more thoughts on where we could potentially go in the future, here is a comparison of the price action of GME from 12/28-1/8 and 4/5 - now (4/16). Both of these time frames cover 2 trading weeks and start on Mondays. As you can see, the price action is extremely similar:

As you can see, the price starts high, decreases all of the first week, reaches a low on Tuesday of the second week, then increases back up Wednesday, and ends below that Wednesday increase for the week. Below is a volume comparison of these time frames:

The similarities in volume are not as apparent as the similarities in price action. The blue line is GME’s IV for that time frame, which we can see decreases to a bottom in both charts. Now, you are probably wondering what happened on 1/11 (the next day after the January time frame) and what that could mean for GME next week. Well, I present to you 1/11 (a Monday) and the rest of that week for GME:

On Monday, 1/11, we see a gap up in price and a significant increase in volume. We then see a pretty neutral Tuesday, followed by an explosive final three days of the week (in both price and volume). Now, what caused that, you ask? It was due to this filing right here on 1/11.

In this bad boy, GME announced that it was accelerating its digital transformation with the help of Ryan Cohen. The continued jump in the later part of the week was not correlated to any news, it seems to be more fomo/media coverage. Interestingly, after 1/11, there was no more fundamental news about the company. The only news about the company was the high short interest, shorts covering, media coverage, and celebrity tweets, which essentially means that the stock rose purely on momentum. With no fundamental announcements about the company but a continued increase in price and volume, I believe that 1/11 was the start of the short squeeze. Here is a closer look comparing the week prior to 1/11 to this previous week:

Obviously, the top chart has 1/11 and 1/12. The bottom chart doesn’t have those corresponding days because I believe, they will occur next Monday and Tuesday (same day of the week), which is why I have crossed out 1/11 and 1/12 on the top chart, so you know what to compare. As you can see, both time frames start with a long red streak, a significant recovery on Wednesday, then they finish the week on two days of low volume and descending price. If what my theory is saying is corrected, then we should experience a significant gap up on Monday and a significant gap up on Wednesday and this will mark the start of the newest squeeze (again just a theory could easily be wrong). As said previously, 1/11 was catalyzed by GME’s filing about their transformation. Well, it just so happens that next week we could potentially be due for a filing catalyst. GME has yet to release the proxy statement for the annual meeting. Last year, GME released its proxy statement and a letter to stockholders on 4/28:

The letter encouraged stockholders to vote (as many have pointed out, GME does not have the ability to recall its shares, only shareholders do; however, GME can encourage shareholders to do so). This year, the record date to vote is 4/20, so it would make sense to expect a proxy statement or some kind of shareholder letter on Monday or Tuesday. This letter and/or statement could include anything such as GME encouraging shareholders to vote, a significant shareholder calling a vote similar to what Hestia did last year (we already know that they have a new slate of board members to vote on). Perhaps that, similar to the filing last year is what will propel GME into squeeze territory, again, just a theory.

Now, let’s compare early January to now using SPY and VIX. Here’s SPY:

As you can see, the Friday before 1/11, SPY was at an all-time high and was overbought on the relative strength index. Well, would you look at where it’s at now? SPY ultimately would not recover from this until after January when the first squeeze was over. I’m not going to include a chart of the VIX, but it is at pre-pandemic levels. When the VIX is at extremely low levels and SPY is overbought, we are ripe for some volatile market conditions. As I have said many times before, GME seems to be correlated to the VIX and inversely correlated to SPY. Since VIX tracks SPY options, we can assume that when GME rises, institutions buy a large number of puts, which would explain the VIX rising, to protect their investments, and sell other investments, which would explain SPY falling. Here is the comparison of GME to SPY and VIX just so you can see the relationship:

3. Extremely big view:

Now, I am going to take a look at the long-term similarities from a technical standpoint in the last 9ish months. First, volume. This time frame will compare the January volume movement to now (4 months: Jan - Apr) to the four months before the squeeze (Sep-Dec). The colored dots show the similarities in volume between each of the two time frames. From what I see, the charts look incredibly similar in how volume moves. From this, you could make the prediction that GME is in line for more volume as this cycle seems to be ending and could repeat (again this is just conjecture).

Moreover, take a took at implied volatility (blue line) and volume flow (similar to on-balance volume but better) (white line):

Volume flow seems to be picking back up similar to how it did before the start of the January squeeze. This indicates that more positive/bullish volume is starting to flow into the stock. Implied volatility is at its lowest level since before the January squeeze. This is also good for GME because it means that options are extremely cheap (relatively), so taking a large position through options (perhaps to try to initiate a gamma squeeze) will not be disturbingly expensive.

Indicators

Right now, I’m going to be taking a quick look into where the technical indicators point to where we could be going. I use MACD, TTM squeeze, Stochastic, and relative strength index (I combine them into two graphs). These are all momentum indicators that can show where a stock could be going based on momentum.

The top chart combines RSI and the stochastic oscillator. RSI shows us that we are trading around 50, which is neutral, so we have room to go up into overbought territory, which is what happened in both of the previous jumps. Stochastic (light grey line) tells us that we are currently in an upward trajectory and have yet to reach our peak. Together, these both tell us that we are in neutral territory and have room for a bull run. The bottom chart combines TTM squeeze and MACD. The TTM squeeze tells us that we are leaving bearish territory and are ready to go into bullish territory because the yellow lines are getting smaller and smaller. MACD is bearish right now, but is about to converge, which would suggest that we are about to start a bullish run. Altogether, these four indicators tell me that we are currently in a neutral position, have tons of room for a bullish run, and may in fact be gearing up for a bullish run.

The wedge

Many of you have seen all the talk of the mother of all wedges. I personally subscribe to this idea. Depending on how you draw the wedge, we are either still inside of it or we have just slightly broken out of it on the upside. Many of you expected the GME wedge to break out like this:

Silly primates. The above picture is only from a very general view of what bullish wedges do. Usually, a wedge breakout does not happen like that (parabolic) unless a major catalyst is announced at the exact time it breaks out. This is how a bullish wedge breakout usually looks:

There is typically a breakout in the wedge and then it goes up significantly over time, not all at once. Depending on how you drew your wedge, it looks like we are at the “buy here” point where it has just broken out of it. Now, if the squeeze happened or some catalyst happened, then we could see a parabolic move similar to the first picture. However, it is much more likely that we see a wedge pattern that goes up rapidly over time but not parabolically like the first one.

Catalysts

As I have long said, GME will not move without a catalyst. I made a post a few days ago about how GME has been shelling out a slew of announcements and why it makes sense for them to want to stock to go far over $190. Please see that post as it will further help you understand my point. If we are to see a GME catalyst in the next week or two, it would likely be: the proxy statement (similar to Hestia last year, which could create a recall), a C.E.O. announcement, anything dealing with Cohen, an announcement a dividend (unlikely). As per my previous post, GME has a vested interest in making the stock rise significantly and I believe that their actions have been intentional. We need a catalyst for the stock to moon, so hopefully, we get one soon.

I personally believe that the proxy statement, which I would guess will come out next week, is what will finally send us. I’m guessing that the media will cover DFV doubling down, which could give another whale reason to get in.

However, another catalyst, which I now believe is a wildcard catalyst is the new S.E.C. rule that was announced on the 16th and will take effect on the 22nd. The rule essentially forces brokerages to have collateral on the shares that they lend out. Full disclosure, I have absolutely no clue what result this will bring. Some people think that this move will cause a scramble of coverages and margin calls leading up to the 22nd. I don’t believe this will happen. Personally, I think that there will be no noticeable effect, but, similar to many of the DTCC rule changes, this will just be one more rule that makes shorting harder as we go forward, so it’s good for us.

The Whale Significance

First, I just wanted to go over the sheer significance of DFV’s move. When he bought more stock after the senate hearing people thought that he was doing it as a joke or just to stick it to Congress, well he was right again and it paid off. Do you really think that he’s just doing this as a joke again? This guy has been right time and time again on this company, and I’m not gonna doubt him. He has had at least two opportunities to sell out his position when GME was over $340, AND HE DIDN’T. Nope, even at $200 below that he doubled down! There are so many times in the past few months where he could’ve closed his position, rolled over his options to a later date, closed only his option position, or even bought puts as insurance, BUT HE DIDN’T. He defied all conventional wisdom and even left money on the table for one simple reason: he likes the stock. That’s all I need to hear.

Finally, I wanted to talk about the MONUMENTAL significance of Blackrock and Vanguard holding GME. Both of these companies got into GME before 2017 when the price was WELL below $10. Therefore, each of them has more than 10x their investment easily; however, they continue to hodl. This clearly isn’t for tax purposes as their gains easily justify taking a tax hit to sell especially if they believe the company is overvalued. Unless…. they are in the exact same boat as DFV. They believe in the long-term trajectory of GME and are hodling just like him. Similar to DFV, they’ve had plenty of opportunities to completely wipe themselves clean of their position for many multiples in ROI, but they didn’t. This again indicates to me that the smart money is long GME and long GME in a big way. In short, THEY like the stock. No….. WE like the stock.

Conclusion

So, let’s say that everything I say is true (again DO NOT TAKE THIS AS FACT), then GME is currently in the same position as it was in early January. This means that the MOASS could be coming in the next few weeks and that any substantial, but not parabolic, jump is probably not the MOASS and is just one more step towards it. Apes, I love you all. I love making these DDs and I love reading your responses. Most importantly, I love this stock. I am not a financial advisor, and this is not financial advice. Remember to take everything I have to say with a grain of salt as you should not take predictions/correlations to be fact, this is just my opinion. Finally, I think that the shorts have lost something more important than money. Something that’s irreplaceable. Something that only apes can truly hold. A love that Sharon will never understand. That’s right, they’ve lost their tegridy to a bunch of apes.

So, has Uncle Hank lost his mind waiting for GME to deliver his sweet tendies? No, not at all. Here’s a pic of a healthy Hank waiting to farm his tendies:

TL;DR

I believe that GME is currently trading in the same pattern that it was in early January and that we could be in for a significant gap up early next week if we get a catalyst, especially one related to S.E.C. filings.