GameStop Corp. (GME) shares have risen nearly 10% over the past week after the company reported strong third quarter financial results. Revenue rose 1.5% to $1.99 billion – beating consensus estimates by $30 million – and net income of 54 cents per share beat consensus estimates by 11 cents per share. Sales of Nintendo Switch and collectables were the strongest performance drivers, while used games experienced an ongoing slowdown.

Analysts had mixed opinions on the stock following the strong earnings report. Benchmark Capital cut its price target on GameStop to $15.00 per share, saying that management has destroyed value and that its diversification strategy has failed. The analyst believes that digital pressures will continue to erode value, with limited terminal value. Despite the strong headline earnings, the analyst also pointed to slower same-store sales and falling user margins. (See also: Game Over for GameStop Bulls.)

Technical chart showing the performance of GameStop Corp. (GME) stock

From a technical standpoint, the stock has rebounded from its lows made earlier this year to just below S1 and trendline resistance levels at around $18.00. The relative strength index (RSI) has recovered from oversold conditions to a neutral reading of 51.31, while the moving average convergence divergence (MACD) experienced a bullish crossover. However, recent candlesticks have demonstrated a lot of indecision in the market following the third quarter financial results.

Traders should watch for a breakout above S1 and trendline resistance levels at $18.00 toward the pivot point at $19.32 or trendline resistance at around $20.00. If the stock fails to pick up momentum, traders should watch for a breakdown below S2 support at $17.23 to retest prior lows at around $16.00. The overall trend remains largely bearish, with shares trading close to their 52-week lows of around $16.00 and well off of 52-weeks highs of almost $27.00. (For more, see: GameStop Earnings Could Trigger Short Squeeze.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.