Last weekend, I warned that the worst mistake GameStop (NYSE: GME) investors could make was to assume the party would continue. Almost as if I could tell the future, the very next trading day, GameStop’s shares began a rapid decline. In the space of a week, they fell from $325 a share the trading day before that piece was published to $63.77 by the end of this past Friday’s trading session. That’s a collapse of just over 80% in just five trading days.
That amazingly prescient timing raises a key question of how I knew GameStop would collapse. Frankly, I could tell it would collapse because the very mechanics that caused its rise were very costly ones that were not self-sustaining. Indeed, it was obvious that GameStop’s shares would reverse course — the only real question was when it would happen.