GameStop's earnings report is approaching, and its pre-earnings signals are turning heads. Both its stock price and short interest have risen - a historically bearish combination.

GameStop (GME) has been a popular meme stock and a prime candidate for short squeezes.

In addition to its meme stock narrative, GME shares another common trend with other stocks.

Some stocks exhibit patterns where the return after earnings depends on both the stock price and short interest prior to earnings.

By combining historical patterns with recent returns, we can use probabilistic reasoning to predict which outcomes are more likely.

GME's stock price tends to mean-revert around earnings, meaning it often moves in the opposite direction of its pre-earnings movement.

In this case, the stock price has increased by 6%, which is considered bearish.

An increase in short interest as a percentage of float (represented by the orange line) is also a bearish signal. In this case, short interest has risen during earnings week.

When both metrics—stock price increase and rising short interest—are observed, the stock has historically tended to decline afterward.

GME is a highly volatile stock and can move 10% up or down on earnings announcements. The only time GME saw significant gains was when the short interest as a percent of float was slightly lower.

Short Interest and Bearish Indicators

When both metrics—stock price increase and rising short interest—are observed, the stock has historically tended to decline afterward.

GME is a highly volatile stock and can move 10% up or down on earnings announcements. The only time GME saw significant gains was when the short interest as a percent of float was slightly lower.

Squeezes

GME has experienced several periods with a squeeze score above 70. Recently, the stock price increased as short interest declined, which qualifies as a short squeeze.

A similar pattern occurred in May, when short interest has been falling since then.

In the case of GME, squeezes do not always happen randomly—they are sometimes planned, making it more difficult to predict them.

GameStop’s pre-earnings signals align with historical bearish patterns. For further insights into GME’s trends, contact us.

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