GameStop (GME) was pretty much cut in half over the past twelve months. Is the worst over? Prices are flirting with their 2016 lows, and our indicators suggest these lows should hold. Fingers -- and indicators -- crossed.
Concentrating on the most-recent price action in this daily chart of GME, above, we can see that prices turned down again in late April. The On-Balance-Volume (OBV) line turned down, with prices telling us that sellers of GME had become more aggressive. Prices are below the declining, 50-day and 200-day moving average lines.
So why should the January lows hold? As prices made lower lows in May, and then June, we can see a positive, or bullish, divergence with the 12-day momentum study. Prices made new lows, but the momentum study made a higher low. The higher low on the momentum study tells us that the rate of price decline has slowed. As prices move down to a potential low or bottom, one often sees momentum slow.
This weekly chart of GME, above, has mixed signals. Yes, prices are below the declining, 40-week moving average line. Yes, the OBV line is pointed down -- but it is at a better level than the last low. I would not exactly call this difference a bullish divergence, but I would say that the selling was more intense at the last low in January than today.
In the lower panel is the 12-week momentum study, and there is a much-higher momentum reading now than in January: This is a bullish divergence. Prices are making equal lows, and the momentum study is making a higher low. The higher momentum low suggests that investors slowed the descent on the second decline. A move for GME back above $31 would improve the picture.