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How to Trade General Motors Stock Ahead of Q1 Earnings: Charting the Way Forward

General Motors Company GM is set to print its first quarter financial results after the market close. The heavily beaten stock was trading down 4% prior to the event and remains down more than 40% from the Jan. 5 all-time high of $67.21.

When the historic electric vehicle maker released its fourth quarter results on Feb. 1, the stock was trading in a strong downtrend. The earnings release accelerated the move and although GM edged higher the next day, the stock continued to plunge in the trading days that followed.

For the fourth quarter, GM reported adjusted EPS of $1.35 on revenue of $33.58 billion. GM beat the consensus estimate of $1.19 per share, but slightly missed the revenue estimate of $34.01 billion.

Ahead of the impending earnings release, Deutsche Bank maintained a buy rating on the stock but lowered the price target to $56. If GM was able to meet even the lowered target price, it would represent a 46% increase from the current stock price.

From a technical analysis perspective, GM stock appears to be headed lower, and if the stock does not receive a bullish earnings reaction, GM could fall to a known 52-week low on Wednesday. It should be noted that holding stocks or options on a profit impression is akin to gambling, as stocks can react bullish to a shortfall and bearish to a beat in profits. Options traders in particular, those holding close call or put options, take on additional risk as the intuitions writing the options increase the premiums to account for implied volatility.

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The GM chart: GM has been trading in a fairly consistent downtrend, with the most recent high printed at $43.24 on April 20 and the most recent lower low formed on April 7 at the 37.60 level. If the stock closes the trading day near its daily low, it will print a bearish Marubozu candlestick, which could indicate that GM will trade lower again on Wednesday, which would likely be another low.

  • If GM continues to fall on Wednesday, a rebound will likely follow later in the week as the stock’s Relative Strength Index (RSI) approaches oversold territory, measuring around 35%. When a stock’s RSI drops near 30%, it can be a buy signal for technical traders.
  • If GM receives a positive reaction to its earnings print and the stock trades higher on Wednesday, it will have broken bullish from a descending trend line that has held GM together since Jan. 4. A break from a descending trendline can indicate a big upside reversal is in the cards.
  • GM has resistance above $40.04 and $42.89 and support below at $38.03 and $35.38.

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