I love it when I see headlines like this
“3 Stocks Near 52-Week Lows Worth Buying” http://www.fool.com/investing/general/2012/07/17/3-stocks-near-52-week-lows-worth-buying.aspx
“Top-Ranked GameStop Corp Getting Very Oversold” http://www.forbes.com/sites/dividendchannel/2012/07/16/top-ranked-gamestop-corp-getting-very-oversold/?partner=yahootix
Then I open the chart and see something like this – Gamestop hitting 3 year lows. It’s like Motley Fool and Forbes are just begging you to catch their falling knife.
So why is Gamestop falling? – look at their numbers. Sales down 12% YOY – Earnings down almost 11% – But Hey they’ve got that great 3.6% dividend. Which is fine if you buy now and the stock doesn’t fall more than 3.6% in the near term. It’s called a value trap and I see them all the time.
I’m not sure if the writers of these articles even understand the business they write about. Gamestop has competitors on all sides selling the same product cheaper than they do. Even the trade in / used game market is dropping as gamers are moving to subscription based services like Gamefly or Rent them at Coinstar’s (CSTR) Redbox kiosk
Anyone wanting to play this short should target $13.20 /S2 level
Stop would be 17.05 which is S1 on the daily chart (bottom chart)
