GM stock selling off during option expiration week

Despite the IPO day opening above the 33 level and projections of $50 per share, the stock chart for General Motors (NYSE: GM) looks like it’s taking a breather this week.
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For the record, the third Friday of every month is the last trading day for option contracts assigned to expire. So, it’s not unusual that GM and many automotive stocks may sell off. However, there may be more to the down move, too.

Fact is, the U.S. dollar fell today relative to other world currencies. That means it will cost automakers like GM more money to purchase raw materials.

The general market has also had a giant run since last September. Even the Vector Vest system shows the trend as an Up/Up situation. It may be getting toppy, but this is earnings season, which may delay any correction.

On the fundamental front, GM is still riding the wave from the 2011 North American International Auto Show in Detroit. The recent introduction of the Chevy Volt, the new Chevy Cruze and the Chevy Sonic have been received quite well by the media and the visitors at the Detroit auto show.

From a technical chart perspective, price dynamics lead the way for interpretation as per the chart provided. Note the price trend bias from the lower left to the upper right: that was bullish until a week ago. The highest close was 38.98 on Jan. 7. Since then, it’s been lower closes, lower highs and lower lows, but on lower volume.

Watch the market action through Friday when January option contracts stop trading. Question is, at what price level will buyers come back in? Support can be found as low as 35, the close of the Dec. 22nd breakout.

Disclosure: Frank Sherosky, creator of the chart and author of "Awaken Your Speculator Mind" does not hold any stock or option positions in GM at this time.

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About the Author: After 39 years in the auto industry as a design engineer, Frank Sherosky now trades stocks and writes articles, books and ebooks via authorfrank.com, but may be contacted here by email: [email protected]

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Additional Reading:
General Motors pays $2 billion in stock to underfunded pension plans
OnStar appoints Linda Marshall to president
GM to auction first LSX454R crate engine for American Heart Association


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