General Motors Turns Higher After Tough Week

General Motors Corp. (GM) posted strong gains on Friday, rising nearly 5% in reaction to bullish analyst comments. The uptick recouped all but 20 cents of a post-holiday slide that dropped the auto manufacturer to the lowest low since May 20th. Even so, accumulation hovered near a 6-month low as the week drew to a close, highlighting aggressive profit-taking after the 247% advance off the 2020 low and chip shortages that continue to impact short-term revenue.

Aggressive Transition into Electric Vehicles

The company has outlined an aggressive transition into electric vehicles, with billions committed to projects and production between now and 2025. However, sidelined investors worry that manufacturers will need to navigate a minefield of obstacles to achieve critical mass for EV sales. For starters, the crazy-quilt of incompatible charging stations scattered across the United States could dampen sales well into the second half of the decade, despite plunging costs for batteries.

Wedbush analyst Dan Ives outlined the bull case on Friday, noting the “laser focus on EV has given new energy and strategic focus to GM which the Street has clearly started to take notice. Going forward GM continues to be a re-rating story as the Street treats the Detroit automaker no longer as a traditional auto company trading based on book value, but a broader disruptive technology play that can start to trade at multiples similar to the likes of Tesla and other pure-play electric vehicle companies.”

Wall Street and Technical Outlook

Wall Street consensus is wildly bullish, standing at a ‘Buy’ rating based upon 19 ‘Buy’, 1 ‘Overweight’ and 3 ‘Hold ‘recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $64 to a Street-high $90 while the stock ended Friday’s session nearly $6 below the low target. This weak placement highlights anxiety about chip shortages and other pandemic-driven headwinds.

General Motors rallied above a 10-year trendline in February 2021 and topped out in the low 60s in March. It failed two breakout attempts into June, triggering a decline that tested four-month support in the mid-50s last week. Weekly and monthly Stochastics oscillators have now flipped into sell cycles, predicting mixed price action into the fourth quarter. A breakout at either end of the four-month trading range should dictate the next large-scale trend move, higher or lower.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.