It’s only Wednesday, and it has already been a wild week in the market.
Retail investors have been flooding into some of the market’s most shorted stocks, with names like AMC Entertainment (NYSE: AMC) and Bed Bath & Beyond (NASDAQ: BBBY) staging jaw-dropping triple-digit rallies.
But the one stock dominating headlines this week has been GameStop (NYSE: GME). The video game retailer’s stock has risen more than 788% over the last week as the Reddit community WallStreetBets has hyped it and spurred a short squeeze, forcing investors to cover their positions and thereby pushing the stock higher and generating a frenzy.
GameStop shares are currently up nearly 1,745% year-to-date despite trading for around 67 times its book value, and despite the fact that the company has been shuttering hundreds of stores as it has struggled for years to regain relevance in the era of Amazon (NASDAQ: AMZN) and video games that can be downloaded directly to players’ devices.
“It’s just a feeding frenzy,” said Wedbush analyst Michael Pachter. “There’s nobody in this stock based on fundamentals.”
Given GameStop’s epic and volatile run higher, Joule Financial’s Quint Tatro said this week that investors may want to cash out.
“If you find yourself long GameStop, I think you take your profits and run and, you know, maybe revisit your thesis in a few months,” Tatro said. “I think if you find yourself short GameStop, I don’t know what you’re doing.”
Tatro likes Walmart for its investments in its e-commerce strategy and exposure to the grocery market, and he counts Kroger’s move into grocery delivery as a plus.
“When this group pulls back, which I think that [it] will, then you’ve got opportunity to buy some value” with these two stocks, Tatro said.
Oppenheimer’s Ari Wald has his eye on another stock in the retail space.
“You have to be aware of the volatility” with GameStop, the Oppenheimer head of technical analysis said. “This is for casino money only. If you get excited about being in this type of stock that everybody’s talking about and that it could be up or down 50% in a matter of minutes, fine, but you have to understand that it can easily be lost.”
“We prefer something less extended like an Overstock.com (NASDAQ: OSTK),” Wald added. “The stock ran up into August, it was extended, it’s corrected since then.”
The correction in Overstock from August through December 2020 fell just past the 61.8% Fibonacci retracement, marking a deep correction, and this week the stock has broken out above resistance.
Wald sees Overstock shares holding support above its 200-day moving average, a technical sign that he says is a sign of a “resumption of long-term strength.”
Overstock shares are up more than 80% so far this year, and is up 42% over the last week alone.