Activist investor Carl Icahn is holding a large short position in GameStop ( GME) , according to reports.
There are approximately 53,370,000 shares of GME sold short as of November, according to the website ShortSqueeze. How much of that short position is held by Icahn I don't know but let's check the charts and technical indicators of GME to try to see what may trigger further price weakness.
Reading about Icahn's early years in the securities business I have no doubt he was probably exposed to technical analysis at Dreyfus or Gruntal.
In the daily bar chart of GME, below, we can see a large potential descending triangle formation. The shares show a pattern of lower highs the past year and a rough pattern of equal lows around $25. Prices are close to an apex so the timing is right for a downside breakout. The trading volume has been shrinking over the past year and that is typical for triangles. As the high/low range of the price action gets narrower the probability of making money is reduced and traders take their money elsewhere where prices are trending.
The On-Balance-Volume (OBV) line has a slight upward tilt and suggests that buyers are being more aggressive. The Moving Average Convergence Divergence (MACD) oscillator is back to the zero line.
In the weekly Japanese candlestick chart of GME, below, we can see a bigger picture of the price action with lower highs going back two years. Prices are below the declining 40-week moving average line.
The weekly trading volume is too small to see on this scale. The weekly OBV line is flat on this scale. The MACD oscillator is bearish.
In this daily Point and Figure chart of GME, below, we can see a potential downside price target in the $22 area.
In this weekly Point and Figure chart of GME, below, we can see a price target of $9.50.
Bottom-line strategy: None of us are a fly on the wall of Carl Icahn's offices so we can only guess about his position and price target but I won't be surprised if GME breaks to the downside. A trade at $19.24 is likely to precipitate further declines.
