Thursday, November 14, 2013

GM General Motors Daily Chart W Pattern Rising Wedge Negative Divergence

GM becomes a darling of long traders. Even the scrap stocks are bolstered in recent months as the Fed intervention lifts all boats and traders continue to look for new opportunities in the non-stop bullish markets. GM is a national embarrassment; it should have went bankrupt just like several of the banks should have in early 2009. Instead, bailouts always save the day and keeps this embarrassment in business. Price is now above its original offering price from late 2010 in the low 30's and may attempt a run at an all-time high (for a 3-year stock) in the days ahead at 39-ish.

The W pattern is a powerful stock pattern for the long side. W's are more powerful if they are under both the 50 and 200-day MA's. The W for GM is under the 200-day for the most part signaling a somewhat healthy pattern and it has not disappointed. The W has a bottom at 18 and top at 28, 10 handles. The breakout occurs early this year, and back kiss, then thrust higher which locked in the W pattern happiness and paves the way to a 38 target (28+10) now achieved. The red lines show a rising wedge and negative divergence for the indicators so there is no reason to chase GM long at this point. Price may very well play around in the wedge for several more months but money is probably best suited elsewhere instead of waiting for some limited additional upside. Keystone's 80/20 rule says 8's lead to 2's so 38 may indicate a preference to top out at the 42-43 area, however, the chart is not enthusiastic about this prospect. If the broad indexes sell off, surely GM will drop. Projection is a topping out in this 38-40 area and then roll over to the downside. No reason to play it long or short now. If you enjoyed the upside, take the money and run. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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