I think General Motors ($GM) is going higher. So why can’t I buy it? (October 23, 2020)
GM
I want to look at General Motors ( NYSE: GM ). I haven’t looked at this stock in forever but now it is kind of getting my attention. To be honest with you, the main reason is because I saw it mentioned in Investor’s Business Daily, about their EV super truck.
Okay, great; but what I am really seeing is this pattern here. This line here, you can kind of draw it loosey-goosey. You can go down there. You can go up here, any number of ways. The drawing of support and resistance lines is, in my view, as much of an art as it is a science. You really kind of have to have a sense for the price action, so this would be mine here.
I will just cut right to the chase, I think this is a stock that you could consider buying but just not now, it is at a real risky place. You look at the weekly chart and you really get the sense that this is a key breakout. Hence, as I said, I think it’s a stock that you can buy. It doesn’t quite fit my template; I’ve got a Mark Minervini type approach, I learned this from him.
The first thing that I see is that the 200-day moving average has just started turning up, and that’s fine. The stock, from a 52-week high is within reach here as well. From that respect, it’s really good. There are a lot of reasons to like this stock, to like this pattern. I like this volume breakout here; this gives me a lot of confidence that this is institutional buying.
It hit 40 million shares on this day, so this was a big breakout day. This was the first hint, really, that the stock was going to come close to breaking out 30.00, and then the very next day it did. But then you get this huge follow-through day this is big buying. And so I believe, from everything that I see here, I believe that this stock is going higher.
But I also believe that the stock is 14 percent or so, above where it broke out. That is typically a time where somebody who bought the breakout would be looking to sell. They would be tapping on the brakes a little bit (pardon the pun) and looking to take profits.
So what I would suggest doing is, I will draw a line here and then I will draw a line down here. And then what I will do is, I will set an alert for a month. And then I will set another alert down here for a month. And so then, frankly, I will only get alerted to this stock when it comes back to a point where I really want to be watching it, particularly, down here.
And you can say, well, why aren’t you setting an alert up here or up here? I will tell you why; because I can’t buy the stock, it just doesn’t fit my rules for actual entries. As far as looking to the stock to buy, absolutely, it does in so many ways. I like the fact that it was squeezing very close to the 50-day moving average; I love those things.
Now, it’s not in a Phase 2 uptrend or a mature uptrend because these moving averages haven’t been in this situation, the way they are now, for very long. So even though the stock has run quite a bit it would an early entry for a long-term trade. However, the entry is literally everything.
If you are in a stock at the right time and the right price it is going to be an easier trade. It still might not make you money but if you are in at the right time and the right price then you risk very little money because you are getting out early. But if you are correct on it, the trade is going to get really easy.
All I am saying is, this is a stock that right here right now you can’t buy. The best time, frankly, to be buying, if you were watching it and I sure wasn’t, I couldn’t buy it on this day even, not the way I would go. Maybe a little bit but honestly, probably not. And I wouldn’t be buying it here because I would look at this as coming off of the bottom but it is General Motors ( NYSE: GM ) and it’s only slightly more interesting than General Electric ( NYSE: GE ).
I wouldn’t have bought it here even though it would have been a great trade. But as the stock gets up here, now I am looking at it, I’m looking at it, and so this might get my attention. You look at the volume here, boom, now it would get my attention, on this break out here.
Again, you have to be looking at it. I am very, very careful in my videos here. I don’t want to give you the impression that I am talking about all of these wonderful trades that I made. I didn’t see this stock; I missed this trade. Now I am looking at it and going, crap, I should be buying this stock. Well, I can’t. Now I definitely should be buying this stock. Well, I’m glad I didn’t.
And so now, at this point, what you have to do is just wait for the entry. Sometimes the best trades you make are the trades that you don’t make, you just have to wait. So I know that if I wait long enough I am going to get some kind of a pullback to a buy point. If I have to wait for the stock to come back to 35.00, if I can ride it to 70.00, I’ll take that. But buying it up here doesn’t make me have much of an advantage.
Free Chart