When we reviewed General Motors Company (GM) last week, we wrote, "We have passed opening day. We are going to see the opening of trout season in New Jersey and we may be waiting for the new models to come out before finding the long side of GM attractive again."
In the past week the price of GM has rallied and the strength could continue Tuesday and generate some positive technical signals. Was my appraisal of GM last week too bearish? Perhaps, but a week of improved activity is typically not enough to reverse a six-month downtrend. Let's look at some fresh charts again.
In this daily bar chart of GM, below, we can see that while GM has not reversed to an uptrend we have not made a new low this month and we have been testing the March highs. A clear close above the March highs and the declining 50-day moving average line just above $39 could be the start of a reversal. More work needs to happen.
Stronger volume and seeing the On-Balance-Volume (OBV) line turn up would help. The Moving Average Convergence Divergence (MACD) oscillator crossed to the upside for a cover shorts buy signal. A move above the zero line would be a more positive statement.
In this weekly bar chart of GM, below, we can see that prices have been below the 40-week moving average line for a number of weeks. The line is turning flat and it will take a weekly close above $40 for GM to be above the line. The weekly OBV line shows some slight improvement recently and the weekly MACD has narrowed slightly but is still in a bearish mode below the zero line.
In this Point and Figure chart of GM below, we can see a small breakout to $38.23 and an upside price target now of $43.43. Despite this upside target there remains plenty of potential resistance in the low to mid-$40s.
Bottom line: GM has more technical work to do to reverse the downtrend, in my opinion. I am not on board as a buyer yet but if you like the fundamental story and want to go long GM I would only risk to $34 as a new low tells me that the downtrend still dominates.