GM stock posting higher highs since IPO

Despite the IPO day momentum open at 35, GM took 28 days to breach the IPO day high of 35.99. Now it has breached the 38 level. Is this due to the annual pump from the NAIAS press, or is it based on the perception of sales and fundamentals by analysts, with projections of $50 per share?

Ask any investor who believes in technical analysis. Stocks that breakout to the upside or to the downside need to be accompanied by high volume. GM has yet to exceed any of the post-IPO high volume days, even on the breakout of December 30. At best, the GM stock price on Jan. 3 made a new high, with volume of 32 million shares registering #4 on the volume hit parade.

Still, some stocks will climb a wall of worry just like the general indexes, and often on average volume. In those cases, though, you will see higher highs and higher lows, the real telltale indicator of a bullish trend bias.

According to the MSNBC Business article, General Motors (NYSE: GM) is riding the wave from the auto sales reports that tout a rebound is in play. It also said that many analysts believe the recent upsurge in stock price is just the beginning, with some saying GM could sell for as much as $50 a share in the near- to medium-term.

For the record, you cannot make IPO day volume as the end-all benchmark, as that day reflected initial positioning and trading more than investing. However, you can compare today’s daily volume to a moving average. Some use a 50 day. The chart below uses a 10 day average (dark blue), because we do not have enough history.

For the record, General Motors emerged from bankruptcy last year and reentered the realm of being publicly traded this past November with the same stock symbols. 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. The low was 33.07.

The last two highest volume days worth mentioning 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 had GM just reaching 32 million shares as of Tuesday’s close, the 4th highest volume day to day since the IPO.

From technical analysis perspective, the previous resistance was the high of the IPO day at 35.99. That’s important for one simple reason: Any technical analysts will tell you that broken resistance becomes future price support.

So, GM’s new highs just above 38 may test that support at 36 before going on to that projected 50 level. Then again, Tuesday’s low of 36.68 may have been it. Point is, nobody can be sure of that, as the market is just not that accommodating by nature.

Full Disclosure: As of this writing, Frank does not hold any stock or option positions on GM. As a day trader and author of “Awaken Your Speculator Mind,” he contributed the price chart.

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Additional Reading:
GM leads the industry in December 2010 corporate sales
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Ford stock price dynamics still show bullish

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