GM stock breaks out on low volume
Ask any investor who believes in technical analysis, though. Stocks that breakout to the upside or to the downside are not taken seriously, unless it is accompanied by high volume.
General Motors (NYSE: GM) emerged from bankruptcy last year and reentered the realm of being publicly traded in November. Not surprising, that IPO day showed over 458 million shares. However, most days since then have been lack luster in terms of volume except when price dropped below its open price of 35 near to its offering at 33. In fact, the low was 33.07.
The last two highest volume days since IPO day were Nov 30th and Dec 17th, with trading volume of 57 and 35 million shares respectively. Even the breakout to new highs has GM barely reaching 21 million shares on any of those days.
Looking at the price-time chart below reveals a new issue with not much history to go on technically. So, volume is an important factor. The only other key elements are major support at 33 and resistance now turned support at the IPO open of 35.
That previous high of 35.99 on opening day has been breached this past week. However, technical analysts always caution against breakouts on lower volume.
The reason for the move may be related to the end of the lock-up period; whereas sites like MarketWatch.com and others show news from various fundamental analysts who cover the stock.
For the record, in early trading Tuesday, Barclays Capital analyst Brian Johnson initiated coverage of the stock with an overweight rating and a price target of $42 a share. Separately, Chris Ceraso of Credit Suisse also started coverage with an overweight rating and an even higher price target of $43.
Shawn Langlois of MarketWatch.com reported an additional analyst upgrade on Wednesday after ConvergEx Group initiated coverage of the stock with a buy rating and a price target of $43 a share.
Also for the record, the North American International Auto Show in Detroit, which always occurs in January, is customarily a period of positive news flow for the auto industry. Other near-term catalysts include news releases about new vehicles; and, this year, any news about the electrification of the automobile.
On the product front, GM has released the Chevy Volt and the Chevy Cruze which replaced the Cobalt. Its eAssist(TM) for Buick is a new technical venue.
All have been getting rave reviews, and will be centerfold attractions at the 2011 North American International Auto Show in Detroit in January. Press days start on Jan 10, with public viewing starting on 15th, one day after the Charity Review.