Has GME's time come and gone?

GME's stock has been a favorite of wall street for a few years now after they aquired their main competitor electronic games boutique (EB). It has had a decent run and hit a high at 50 recently. Take a look at this two year weekly chart, notice a previous price channel:GME is the dominant player in the brick and morter video game retail industry and sells through gamestop and EB locations. The video game industry has been growing steadily over the years with the success of the playstation 2 and xbox and is likely to grow further with new systems comming out this christmas. Many have wondered not if, but when video games will begin being sold and downloaded online. When this transition occurs the brick and morters who are not ready will be hit hard no unlike the bankrupt musicland and distrubuters like Navarre. Nintendo recently announced their new wii system will be able to download games from any previous system online directly from them for 5-10$ a pop. This is bad news for gamestop because not only will it hurt sales of new games, but the re-sell portion of their business should also hurt. Many will say that nintendo is a smaller player, but they are quickly taking market share away from the competitors and the new portable nintendo DS is becoming a pop icon like the ipod. This is purely speculation but I suspect the era of game downloading to home systems will begin as early as next year. This is certainly a gradual change and not abrupt, but from a trading standpoint the top where funds and the stret begin to dump is lucrative. Also this could potentially be a very long term short given the horizons. Take a look at this 6 month daily chart:

From a technical standpoint the stock has been taking on water ever since it touched its 50 on a few gap an runs. This follows the 6 months of channeling leading to the breakout. Since the decline began GME has followed a trendline down with the lower BB through support around 38 and through both moving averages (50 and 200 dma). This has occured on increasing volume and I suspect that institutions are begining to take profits on GME. The ideal entry would be at 38 or higher with an initial target around 33 where a gap becomes closed from there GME may trade in the old range for an indefinate period of time before the big collapse. I suspect when all is said and done this decline will look alot like MOVI's.

There are alot of factors to keep in mind. The new nintendo DS lite is selling out like crazy right now along with the games. But I suspect this may hurt GME because the system only sells for 130$ so if it is being bought instead of the PSP at 250$ or xbox live at 500$ then GME may miss out on some profit. GME apears to be aware of this and is trying to make up for the cheaper system by selling in house accessories and system bundles. Also nintendo's new system wii coming out this christmas will be much cheaper than the competition. Again this is just speculation but I think nintendo is going to come out way ahead in all this stealing market share from it's competitors with innovative ideas like touch screens and motion interactive games, not to mention much lower costs.

I will follow this one for a while as I suspect there may be alot of downside comming for GME. There will be more later as the situation develops. For now go try out the new nintendo DS and ask yourself if nintendo is once again about to rule the world.

More here.

NOTE: I will be on vacation for the next two weeks so there won't be much if any posting during this time. The other members may post if they want. I will be back online in the swing of things mid july. My current holdings are long: IOTN, MOVI, HOM, short: GME. Have a great summer!