General Motors Stock Buyers Should Wait for the New Models

 | Mar 09, 2018 | 10:45 AM EST
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We reviewed the charts of General Motors Co. (GM) last week, and we summed up the outlook this way: "Keep your seat belts on and defer your buying on GM as a better buying opportunity could present itself in the next two months." Here we are a week later and prices may have formed a bearish flag pattern. Let's look closer.

In this updated daily bar chart of GM, below, we can see the sharp move lower on March 1 and 2 followed by the tight trading range price action the subsequent days. The sharp move lower can be considered the "pole" of the flag pattern. The sideways price action from the 5th of March has been on lighter trading volume, which is typical of a flag as traders make small adjustments in positions. Another sharp move lower would complete the flag pattern.

The daily On-Balance-Volume (OBV) line has been in a downtrend from late October and tells us that sellers of GM have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator is still pointed down in a bearish mode below the zero line.

In this weekly bar chart of GM, below, we can see that prices are below the rising 40-week moving average line. There is chart support visible in the $36-$34 area and that could be tested in the near-term. The weekly OBV line has been "choppy" lately but overall has been weak and suggests that sellers of GM have been more aggressive. The weekly MACD oscillator is bearish and close to crossing below the zero line.

In this Point and Figure chart of GM, below, we can see a downside price target of $35.40 shown. Chart support may not appear till $34.

Bottom line: Traders and investors looking to go long GM should continue to defer purchases.

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