General Motors Company (GM) shares broke out to an all-time high on Tuesday, mounting tough 2017 resistance in the mid-$40s. Exceptionally strong buying pressure lifted accumulation readings to new highs at the same time, setting the stage for impressive 2021 returns. The old-school auto manufacturer has Tesla, Inc. (TSLA) and other electric vehicle (EV) upstarts to thank for the uptick, forcing innovation after years of brain-dead management that couldn't see past combustion engines.
- General Motors stock broke out to an all-time high on Tuesday.
- The company expects to have 30 fully electric vehicles in production by 2025.
- A 10-year trendline at $50 could trigger a final pullback and buying opportunity into the mid- to upper $30s.
"Robinhood traders" and the younger generation have underpinned the upside as well, with skyrocketing sector interest as a result of intense speculation on winners and losers in the EV era, finally bringing these high-tech vehicles into the mainstream. The capital flood is also speeding up battery life research, in the same way that chip manufacturers blew past arbitrary speed barriers in the 1990s and early 2000s.
GM now expects to have 30 fully electric vehicles in production by 2025 and is seeking to establish the highest EV market share in North America. That should be easier than some folks expect because Tesla hasn't shown the capacity to handle mass production at a level now achieved by traditional manufacturers. In addition, GM's EV price points should be lower than rivals who have to pay off enormous debt loads incurred during their growth spurts.
Wall Street consensus on GM stock has blossomed in the past year, with a "Strong Buy" rating based upon 22 "Buy" and 1 "Hold" recommendation. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $43 to a Street-high $65, while the stock is set to open Wednesday's session about $2 below the median $52 target. This placement should support an advance to the barrier discussed below.
Mass production is the manufacturing of large quantities of standardized products, often using assembly lines or automation technology. Mass production facilitates the efficient production of a large number of similar products.
GM Monthly Chart (2010 – 2021)
The company came public in the mid-$30s in 2010, after emerging from bankruptcy, and topped out at $39.48 a month later. The subsequent decline ended in the upper teens in 2012, setting the stage for an advance that topped out at $41.85 in 2013. That marked the highest high into a 2017 uptrend that reached $46.76 before turning tail in a failed breakout. A decline into October 2018 held above mid-decade lows, yielding range-bound action into a February 2020 breakdown.
The stock posted an all-time low at $14.32 in March and turned higher into the second quarter. The steady uptick mounted broken 2018 range support in the mid-$20s in July, ahead of additional gains that reached 2017 resistance in November. A shallow pullback into December attracted strong buying interest that has now translated into a breakout, generating the highest volume in GM's 10-year public history.
The monthly chart reveals a final obstacle, with the multi-year trendline of rising highs now situated at $50. This barrier has triggered three major declines since 2011, warning investors that it might be the wrong time to jump on board. Price action has also traversed from an all-time low to all-time high with no major correction, suggesting that buyers wait for price to pull back, perhaps into the breakout above the red trendline of lower highs.
A correction is a decline of 10% or more in the price of a security from its most recent peak. An asset, index, or market may fall into a correction either briefly or for sustained periods – days, weeks, months, or even longer. However, the average market correction is short lived and lasts anywhere between three and four months.
The Bottom Line
GM stock has broken out to an all-time high, but long-term resistance could limit gains in the first half of 2021.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.