GM Stock: Forging New All-Time Highs
General Motors Company (NYSE: GM) stock is quietly but surely staging a bullish advance. GM stock is currently trading at a new all-time high, which is an impressive indication of the inherent strength contained within General Motors stock.
I can honestly say that this feat is no surprise, because I have been speculating that a bullish advance was in the making since October 2016, when I published a report titled “General Motors Company: GM stock has Some Serious Upside.” In that publication, I outlined a number of developments on the company’s stock chart that were suggesting that higher stock prices were on the horizon.
These developments are still centered around constructive price action and an influential momentum indicator, which were both implying and reinforcing the notion of higher GM stock prices. These are both tools within the context of technical analysis, which is the method of investment analysis I employ in order to generate a view on a potential investment.
Technical analysis is based on the idea that historical price and volume data can be used to forecast what the future may bring. When this method of investment analysis is applied correctly, the results are simply astonishing.
The following General Motors stock chart illustrates the technical developments that implied and reinforced the notion that higher stock prices were on the horizon.
Chart courtesy of StockCharts.com
This General Motors stock chart is a prime example of constructive price action.
Constructive price action consists of an alternating wave structure containing impulse waves and consolidation waves.
An impulse wave is characterized by a swift and relentless move towards higher stock prices. This wave, which is highlighted in green on the stock chart, is where all the gains are captured in a bullish trend.
A consolidation wave is characterized by choppy and range-bound trading action that prevents the stock price from staging an advance. This wave, which is highlighted in purple on the stock chart, serves to unwind any overbought conditions that were created in the preceding impulse wave. This price action creates the necessary environment where a new impulse wave can develop.
These waves are dependent on one another; in an alternating wave structure, they create the necessary foundation where a bullish trend can develop and flourish.
In December 2016, GM stock exited the consolidation wave in an upward direction, suggesting that the consolidation wave was complete and that, therefore, a new impulse wave was in development.
This bullish view was being reinforced by the moving average convergence/divergence (MACD) indicator in the lower panel of the stock chart. MACD is a trend-following momentum indicator that uses a signal line cross to distinguish between bullish and bearish momentum.
In September 2016, a bullish MACD cross was generated, indicating that bullish momentum was influencing GM stock, creating the path of least resistance toward higher stock prices. Aside from just suggesting that higher stock prices are on the horizon, this indication has an excellent track record of confirming which wave is in development. The bullish MACD cross was implying that an impulse wave was set to develop.
That indication proved to be correct, because a new impulse wave is now in development and GM stock is forging new highs. The MACD indicator remains in bullish alignment, supporting the thesis that higher General Motors stock prices are on the horizon.
I have the inclination to believe that higher stock prices are still in development because, aside from only suggesting that higher stock prices are on the horizon, constructive price action can be used to create a potential price objective for the impulse wave that is currently in development.
The theory behind this wave structure is that impulse waves separated by a consolidation wave tend to mirror each other in length. Putting this theory to work produces a price objective of $44.00 for General Motors stock.
General Motors stock is forging new all-time highs, which on its own suggests that further gains are in order. Luckily, this is not the only indication supporting a bullish view on this investment because a number of technical indicators are supporting the notion that higher GM stock prices are on the horizon.
As a result, my bullish inclination towards this investment that began in the fall of last year is playing out as expected. Therefore, I will continue to view this investment in a bullish light until there are indications that suggest and support the notion that another view is warranted.