Medium term
Trade view / 16 September 2015 at 14:03 GMT

GM has a lot of downside potential left

CEO / Att Trading
Austria
Instrument: GM:xnys
Price target:
Market price:
Background

General Motors is an American company headquartered in Detroit, Michigan, which builds and sells cars. Based on global sales GM is one of the biggest car manufacturers in the world.
In the following technical analysis we will take a look on the downside potential of GM. 

In the daily chart in figure 1 we can see that the stock price of GM was falling since the end of 2013. Since it´s high in the end of 2013 it nearly fell 35%. After trying to break out of its downtrend at the beginning of 2015, the stock began to fall even faster. Since the low at $24.82 GM recovered to $30.72 at the moment.

The downtrend began to accelerate since end of June which brought this stock to our attention.

GM daily chart (5 years)

gm1
Source: ATT Trading


Management and risk description

In this short trend since June GM crossed the simple 200-day moving average 200 high volume. Because of the big correction since the last low at $24.82 we have lucrative targets.
When the stock begins to show weakness in the correction zone (figure2) we can enter a short trade on a smaller trend size. Even if we wait for a clear short signal on that smaller trend size we would still have a lucrative target (figure 2, target 1). The black arrows show one possible development of the stock in the near future.

At target 1 you should consider a big partial take profit and more profit should be seen as a bonus. One possible target for the second part of our position could be the target 2 at $19.
If GM leaves the correction zone at the upper side, our short scenario is over and you could consider a long trade.

GM daily chart
gm2

Source: ATT Trading


Before any trade it is always necessary to look for news e.g. company earnings.
And this week it is also necessary to wait until the FOMC meeting is over.

Parameters

Entry: $31.50

Stop: $32.50

Target: $25.00, $19.00

Time horizon: medium-term

— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more

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