Price dynamics reflecting GM investor reaction to Q1 earnings report
The official news release said that General Motors Company (NYSE: GM) announced net revenue in the first quarter of 2012 of $37.8 billion. Earnings before interest and tax (EBIT) adjusted was $2.2 billion.
Now comes the reaction of the market to the news, which, as of this morning, has GM stock still heading downward toward the past broken resistance level of 22.11. Will it hold? Your guess is as good as mine, as the next lower level is the major low of 19.00.
Will that level be tested? Will it hold if tested?
And that’s the point I always try to make. It is the market which decides support and resistance levels, and whether they will be tested, how many times, and whether they will hold of fall through. If you violate that understanding, then you are doomed to be surprised time and time again.
Just to give you a further clue, recall my report on the April sales report just a few days ago. Read: GM stock reaction to drop in April sales looks meaningless, awaiting earnings. and now that earnings are out, it appears the investors were reacting ahead of schedule; but it's hard to know for sure until it actually happens.
GM forward-looking statements surely seem to be a mixed bag, too. The company raised 2012 industry outlook from 13.5M-14M units to 14M-14.5M units. So, far so good. Then April sales do not appear to be a major concern, as GM knows it will get its share of the pie.
Still, inventory in April did not make anyone happy either. It raised to 713,008 from 701,889, but the projection for more sales by the industry will reduce GM inventory if all goes well.
Most notable, though, was that report about the potential being high for the next GM executive to be female per Reuters. I say it’s about time.
Then the Detroit News offered a story that GM was laying off 100 white collar workers. I read that as simply more clearing of cobwebs or what GM thinks are cobwebs. Even Ford is offering another round of pension buyouts. Read: Ford stock hits trading channel for a reason
Back to the GM Chart
I personally prefer technical analysis over fundamental analysis, because technical analysis reflects immediacy; and I am not the first person to reason that way.
For the record, GM stock is well below its IPO price. So, right now that is not the issue. Instead we need to concentrate on the more immediate prize zone, the price action between the 19.00 low and the 27.00 peak high from last November.