GM Stock: Price Eruption
General Motors Company (NYSE:GM) is moving into self-driving vehicles and the testing has begun, as they are looking for test drivers. GM is testing autonomous technology, and GM stock will benefit as the company embraces the future.
I can imagine a day when the most dangerous thing we do everyday, commuting on the roads, will be replaced by self-driving vehicles, and perhaps the problems associated with traffic will be finally be done away with. This is perhaps wishful thinking, but I am happy that GM is pursuing this venture.
If this is indeed the future, then someone needs to get there first and pave the way for the others. GM is not the only automaker seeking to acquire such technology, so the race to get their first has begun.
I am bullish on GM stock because the company’s price chart is bullish and constructive. Perhaps the speculation behind autonomous driving—and the thought of every car being replaced by driverless vehicles—is painting a bullish picture on the price chart. I can only speculate as to the reason why, but that does little to sway my bullish bias.
The following General Motors stock chart illustrates the bullish trend and the signals that have created my bullish bias.
Chart courtesy of StockCharts.com
The wave structure on the chart above is bullish, and the signals generated also support my bullish view.
In the summer of 2012, GM stock bottomed and the price then proceeded to move higher in a linear pattern as GM stock went from a low of $16.72 to a high of $37.38. This surge in price represents an impulse wave, and this one is $20.00 in length.
The shares then proceeded to trade within a range that is described as a consolidation wave. Consolidation waves follow impulse waves and, once they are complete, another impulse wave can develop. It is not uncommon for chart patterns to be symmetrical. Based on this notion, the consolidation wave is set to complete in late November or early December. The pattern will complete when the upper trend line representing resistance is broken to the upside.
As a general rule of thumb, the next impulse wave will match the prevailing impulse wave prior to the consolidation wave. Using this as the framework to generate a target price, I generated a price objective of $44.00
The indicator on the bottom of the chart above, labeled “MACD,” also supports my bullish bias. Moving average convergence divergence (MACD) is a simple and effective trend-following momentum indicator. Signal line crossings are used to distinguish between bullish and bearish signals. I frequent this signal with an orthodox following, as many fat-tailed trends have begun on such a signal.
This momentum indicator has, as recently as October 2016, generated a bullish cross and suggests that bullish tailwinds should persist for General Motors stock for some time to come.
The following General Motors stock chart illustrates other positive developments that support my bullish bias.
Chart courtesy of StockCharts.com
The horizontal dotted line represents a level of resistance that has contained prices for all of 2016. The level also marks the benchmark from which 2016 year-to-date performance numbers will be compared against, as this level marks the break-even point. The difference between a positive and negative return in 2016 will depend on which side of this trend line General Motors stock closes out the year.
In August 2016, General Motors stock generated a golden cross. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. This signal is used by many to confirm that a bull market is on the horizon. I have found it wise never to ignore this signal by never trading against it.
It is not a coincidence that GM stock broke above the horizontal level of resistance soon after the golden cross was generated.
The Bottom Line on General Motors Stock
I am bullish on General Motors stock, and the signals generated from the chart are what my views are based on. My bias on GM stock will remain bullish for as long as the price chart supports this view.