GameStop shares spike after slump: will these surges be short-lived?

• GameStop share price falls 33% overnight.
• Prices once again spike on the morning of 28 January.
• White House 'monitoring' situation.
• Does overnight slump and early spike reflect ‘unsustainable’ bull run?

GameStop (GME.N) shares reached $372 on 27 January thanks to a rush of activity inspired by small traders. With members of the WallStreetBets (WSB) sub-reddit fuelling an unprecedented surge, trading was temporarily suspended as short-sellers scrambled to save their positions. However, prices seem set to spike once again. Does this reflect a naturally ‘unsustainable’ and unstable future for the stock?

GameStop share price reflective of unstable market

Following these two events, the GameStop share price dropped 33% from yesterday’s high ($372) to an overnight low of $248. A new sub-reddit subsequently emerged and GameStop shares regained momentum. They soon moved to $298 before retreating back down to $257. The rollercoaster ride ended with stocks finishing the session at $292. However, prices are beginning to creep up once again, suggesting to all involved that the rollercoaster ride is set to continue. The question remains, though, will the popularity of this stock surge soon run out of steam? The volatile and reactive patterns suggest yes.

Overall, activity in the last 24 hours caused the GameStop share price to fall 21.5% from $372 to $292. However, its value is still significantly up from the start of the week when the small investors vs. Wall Street short-sellers game began. In the early stages of the spike in after-hours trading activity on 20 January, shares steadily increased from $39 to $76. As the rumblings of a pump reverberated across the markets and, in turn, the value soared.

Will individual investors defeat Wall Street shorts?

The initial dip could be bad news for individual GameStop investors, as regulators have now entered the game. The recent rush has attracted the eye of newly appointed US Treasury Secretary Janet Yellen. In a statement from the White House, she confirmed that her team was ‘monitoring the situation’. This could lead to a pull back from investors looking to sell before trading is suspended completely. Or, based on the apparent raison d'etre of WallStreetBets, it could trigger further backlash.

Whatever the response, the GameStop share price is likely to remain volatile. The bull run might not be over, but the dip, and subsequent rise, may be a sign of things to come. Nils Pratley of The Guardian has described the surge as ‘unsustainable’ as ‘nothing of note has happened to improve GameStop’s commercial prospects’. The question now is, can Wall Street short-sellers beat small traders' self-styled ‘degenerate’ revolution?