In his "No Huddle Offense" segment of Mad Money Monday evening, Jim Cramer reminded younger investors that there's more to investing than just the meme stocks and technology. Diversification is an important lesson that every investor needs to learn and for many of the Robinhood investors, the time to learn it is now.
The big money managers have moved on to the reopening stocks, Cramer explained, and that means stocks like GameStop (GME) aren't going to revisit their former highs.
Let's check out the charts of GME.
In this daily Japanese candlestick chart of GME, below, we zoomed in the past three months - that's where all the action is, after all. Notice the two large upper shadows in late January and the middle of March. This shows you that some traders aggressively rejected the highs. There are actually more upper shadows on the chart below telling me that there may have been a number of "rational" traders that saw the rally as unsustainable.
Trading volume has been diminishing since late January and that is not a bullish development as it tells old-time chart watchers that the speculative interest has moved on to other names. The Moving Average Convergence Divergence (MACD) oscillator is currently pointed lower.
In this daily Point and Figure chart of GME, below, we used a five box reversal filter to generate the chart. Here the software is projecting a potential downside price target in the $74 area. This would break the March lows.
Bottom line strategy: I don't know whether a company like GME will become a case study at Harvard but I think it is a candidate. Meanwhile, the charts of GME are suggesting we could see lower prices in the weeks and months ahead.