February 3, 2015
Shares of GM have formed a relatively well-defined inverted head and shoulders pattern. The neckline has been tested no less than six times in as many months and there is a clear low (August), lower low (October), and a higher low (December). All the recipes to satisfy a head and shoulders bottoming formation.
Significantly, in the current market, we really need to see not only pattern confirmation, but also a validated re-test. We saw that in January as shares re-tested the neckline. While they did briefly fall below the neckline, the current market has been all about false moves – whether they be false breakouts or false breakdowns.
Additionally, the neckline happened to rest at almost precisely the 200MA and 50MA. All very important levels. And the MACD on the daily chart is curling up as well. We believe shares will be significantly higher in the months ahead. This is supported by fundamentals as well, as the severe drop in oil prices allow the company to regain its competitive edge against transportation options that use alternative forms of energy. Shares could see the $39-40 level before summer.