The prominent American multinational corporation headquartered in Detroit that designs, manufactures, markets, and distributes vehicles and vehicle parts, General Motors Company (NYSE: GM) shows signs of an upcoming price surge according to its latest charts.
Bullish Indications
#1 Falling Wedge Breakout: The daily chart of GM shows that the stock was trading within a falling wedge pattern for the past several months. This is marked in the daily chart in pink color. Currently, the stock has broken out of this falling wedge pattern. A falling wedge pattern is a bullish pattern and a breakout from this pattern shows that the stock has gained momentum and has the potential to move further up.
Daily Chart – GM
#2 IH&S Pattern: As you can see from the daily chart, the stock has formed an Inverted Head and Shoulders (IH&S) pattern within the falling wedge pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from it indicates that the stock may move higher in the short term.
[hana-code-insert name=’adsense-article’ /]#3 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day moving averages, indicating a bullish bias for the stock.#4 Bullish MACD: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
#5 Bullish Stochastic: The daily chart shows that the %K line is above the %D line in the stochastic. This indicates possible bullishness.
#6 Bullish RSI: The RSI in the daily chart is currently above 50 and moving up. This indicates the strength of the current upmove.
#7 CCI -Price Bullish Divergence: There is a bullish divergence between CCI and price in the weekly chart. While the price formed a lower low, the CCI formed to a higher low. This is marked as blue dotted lines in the weekly chart. This is a possible bullish sign.
Weekly Chart – GM
#8 Near support Area: The weekly chart shows that the stock is currently above a support area. This is marked as a green dotted line. This seems like a good area for a bounceback.
#9 Other Bullish Indications: There are also other bullish indications on the weekly chart like bullish RSI bullish CCI, bullish MACD, and bullish stochastic. These point to a possible upmove in the near-term.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, you can purchase shares of GM between the prices $38.30 and $40.
TP: Our target prices are $45 and $55 in the next 4 to 6 months.
SL: To limit risk, place a stop loss at $36.50. Note that this stop loss is on a closing basis.
Our target potential upside is almost 17% to 44% in the next 4-6 months.
- Entry at $38.30: For a risk of $1.80, our first target reward is $6.70 and second target reward is $16.70. This is a 1:4 and 1:9 risk-reward trade.
- Entry at $40: For a risk of $3.50, our second target reward is $15.00. This is a 1:4 risk-reward trade.
In other words, this trade offers nearly 4x to 9x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the falling wedge pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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