Why GameStop's Short Squeeze Lost Steam

Last week’s Congressional hearing on the GameStop (NYSE:GME) short-squeeze failed to help the stock. GME stock started last week at over $50 but ended at around $40.00.

What happened?

Testimony from Reddit and Youtube star "Roaring Kitty," or Keith Gill, is highly bullish on GameStop’s value. Conversely, Congress questioned Citadel’s CEO, Ken Griffin. Any conflict of interest and trading rules meant to benefit the institutional traders may not get fully explored. This suggests that few rules will change to benefit retail investors.

Algos probably already modeled the GameStop squeeze so another rise in shares is unlikely to happen again. Markets are recognizing the limited near-term trading potential on GME stock. So, retail investors who bought the stock in hopes of a quick gain will sell into any rally.

Redditors who are holding the stock to the very end will not sell. But because sellers will outnumber these shareholders by share count, the selling pressure will continue.

Upside Potential

The U.S. government may introduce regulatory changes that tilt the game to help the retail investor. That may give GME holders a glimmer of hope. Rules that reward astute investors who researched the potential value of GameStop are welcome.

GME’s volatility remains a trading opportunity for both long and short market players.