The short trade in GME seemed to be a rather obvious setup. After a long labored rally from the November 21 low, GME rallied in 3 waves to the top of its upper parallel trendline and the 200dema where it reversed. About the same time my younger children started buying used games at Gamestop, which they informed me were much cheaper and that of alot of their friends were doing it now too - translation: lower earnings.
After the reversal, GME broke down below the steep upward sloping trendline and formed a sell pivot. I went short a half position just below the pivot. Another pivot formed at the lower trendline, but at that point it was just before GME's scheduled earnings announcement so I decided to hold on adding to the position.
The earnings and guidance disappointed as expected and GME gapped down, and then rallied back to the trendline. Since the gap down completed a 5 wave decline, I decided it would be best to wait for the completion of an upward correction and a new sell pivot. However, the rally to the trendline was it, and the sell pivot formed at a lower level. Being so far from my initial entry I cut back on the position size on the second entry.
On July 14, a MACD positive divergence buy signal was generated and GME closed above it downsloping trendline, which also happened to be one day after the first big move up in the markets off of the July 8 low. Therefore, even though my target below 18.00 was not hit, it was time to cover.
GME has now completed a perfect 3 wave abc, zigzag, decline from its April high, so we can expect that a rally back up toward and perhaps above the April highs is underway. I certainly have no intention of going long this stock, but it may be a future short candidate.
Overall I captured 32% of the move, which is fair, for a profit of 15.9% and less than my goal of 30%, but I am not complaining. I think this conservative approach repeated in a disciplined manner will yield consistent profits for patient traders. The time in the trade of 50 trading days works out to about 80% annualized.