I bought $600 worth of GameStop (GME) today.

In the video below, I show a setup that has happened in GameStop (GME) that may surprise you.

A capitulation gap down occurred last month. This is the level where the pain became to great for the majority of bulls and this stock. A capitulation gap signals that the crowd in this stock is very emotional. We are logical traders seeking to take the money of the emotional traders in this stock. Emotionally traded stocks always overreact either to the upside or the downside. That is certainly the case with this stock as an in-line earnings release caused the stop to gap down. We step in to take advantage of this emotional, overreaction to the downside.

Emotional swings provide trading opportunities, while efficient markets chop up and down, offering no edge to traders, only piling up their costs. Technical analysis tools will work for you only if
you have the discipline to wait for patterns to emerge. Professionals trade only when markets offer them special advantages.

Even better, an insider has seen this emotional overreaction to the downside and has jumped in to the tune of over $1,000,000.00 in insider buying last week.

This is a follow the insider, turn around play.

Keep in mind that I’m buying into a downtrend and so these can be a bit more difficult to make money in. More conservative traders may want to wait for a break above the 50 line on the RSI.

Technorati Tags: bulls, capitulation, capitulation gap down, crowd, discipline, downside, earnings, emotional swings, gamestop, gap, gme, insider, insider buying, money, overreaction, rsi, signals, stock, stocks, technical analysis tools

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