The T-REX 2X Long GME Daily Target ETF (GMEU) gained 5% as renewed buying interest in GameStop Corp. (GME) boosted the leveraged fund. CEO Ryan Cohen's continued stock purchase has strengthened the bullish narrative, but overbought technical indicators suggest the rally could face turbulence.
GameStop shares reached a 52-week high of $28.22 on Wednesday before paring some gains. GameStop shares were up 3.28% at $28.04 during regular trading Thursday and are trading higher by 0.01% at $28.04 in after-hours trading, according to market data.
GME Technicals Signal Strong Momentum, But Overbought Conditions Raise Risks
GameStop is trading 12.8% above its 20-day simple moving average (SMA), 30.8% above its 50-day SMA and 29.5% above its 100-day SMA, indicating a strong short-term upward trend, according to market data.
However, its Relative Strength Index (RSI) stands at 74.49, above the commonly watched overbought threshold of 70. This suggests the stock could face profit-taking or consolidation after its recent advance.
The Moving Average Convergence Divergence (MACD) indicator remains above its signal line, supporting the bullish momentum. Still, the overbought RSI raises the risk of a near-term pullback.
GameStop has key support around $22.50, while the technical analysis identifies no clear resistance above the current price. The stock is also trading near the upper end of its 52-week range, reflecting strong buying interest but leaving it vulnerable to reversals.
A death cross in June, when the 50-day SMA fell below the 200-day SMA, previously signaled bearish momentum. The stock's current position above its shorter-term moving averages suggests a recovery, although the longer-term trend warrants monitoring. GameStop has gained 19.17% over the past 12 months.
GMEU's Daily Leverage Amplifies Gains And Losses
GMEU targets twice GameStop's daily return before fees and expenses. A 5% daily gain in GME would theoretically translate into a 10% gain in GMEU, while a 5% decline could produce a 10% loss, before fees and tracking differences.
The ETF resets its leverage daily, meaning its returns over multiple sessions can diverge significantly from twice GameStop's cumulative performance. Volatile, sideways trading can erode returns through daily compounding, even if GME eventually returns near its starting price.
GMEU also carries a 1.50% annual expense ratio, adding to holding costs.
Can GMEU's Rally Continue?
The bullish case rests on Cohen's insider buying, GameStop's position above its shorter-term moving averages and a MACD that continues to signal upward momentum.
However, an RSI of 74.49 suggests the stock may be stretched in the near term. A sustained uptrend could support further gains in GMEU, but profit-taking in GameStop could quickly magnify losses in the leveraged ETF.
For GMEU investors, the key is whether GameStop can sustain its momentum without a sharp reversal. The latest 5% gain highlights the opportunity in leveraged exposure, but the overbought setup underscores the risks of chasing the rally.
