General Motors Company designs, builds, and sells cars, trucks, crossovers, and automobile parts worldwide. The company operates through GM North America, GM Europe, GM International Operations, GM South America, and GM Financial segments. It markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Holden, Opel, Vauxhall, Baojun, Jiefang, and Wuling brand names.
Take a look at the 1-year chart of General Motors (NYSE: GM) below with added notations:
GM has been trading sideways for the past 3 months, while forming a common chart pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. The GM rectangle pattern has formed a $38 resistance (red) and a $34.50 support (green). The break above $38 would also be a new 52-week high, which should lead to higher prices overall for the stock.
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The Tale of the Tape: GM is trading within a rectangle pattern. The possible long positions on the stock would be on a pullback to $34.50, or on a break above $38, with a stop placed under that level. A short position could be entered on a break below $34.50.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach