What the GameStop Short Squeeze Teaches About Trading Range
See why GameStop's January 28 close tells only a small part of what traders faced during the day.
2 min read
A small candle body can hide a huge trading range
A candle body shows the distance between the open and close. It does not show every price traded during the day. The high and low appear as wicks. That difference becomes important when a stock is moving quickly. See our guide to reading a chart if those candle parts are new to you.
What can you see before pressing Play?
GameStop had already climbed from less than $5 to a January 27 close of $62.20 on the split-adjusted chart. The candles grew taller as the rise became faster. This period is often called a short squeeze, which happens when rising prices force some traders who bet against a stock to buy shares back.
The SEC staff report describes several forces around GameStop, including large price moves, heavy trading, short interest, and attention from social media. Before pressing Play, ask: can the next candle look almost unchanged while traders experience a much larger move inside it?
What happened on January 28?
GameStop opened at $86.8775 and closed at $86.7525. The body is tiny because those prices are almost equal. Yet the stock traded as high as $128.28 and as low as $28.0625. That is a range of more than $100 inside one day.
The close was still 39.5% above the previous day's close, so the session was not quiet. More importantly, the small body says nothing about where a trader entered or exited. Someone buying near the high faced a very different day from someone buying near the low.
Why this matters to a trader
Never judge volatility from the candle body alone. Compare the high and low, then look at the wicks. When the range becomes much larger than recent candles, old position sizes can create far more risk than expected. Review position sizing before practicing with charts that move this quickly.