The charts in this car stock look attractive after months of trading in a range, says Jay Woods
General Motors has quietly been one of thebettercomeback stories in the market. While shares are only higher byroughly 1%year to date,don’tlet that fool you.GM has surgednearly 70%over the past 52 weeksas investors have rewarded a leaner, more disciplined company focused on margins, cash flow and shareholder returns. Full disclosure, I have a love/hate relationship with this stock. It was one of the first stocks I ever owned. I was gifted two shares in second grade and held them until they went bankruptand were delisted from the NYSE in2009.It broke my heart, but I have moved on and so have they. Theyreturned to the NYSE in late 2010 and now,over a decade later,it’sback on my radar. This is not the sameGM simplyknown as acyclical auto manufacturer. The company underCEOMary Barra’s leadership has navigatedthrough several obstacles and isstarting to see results fromnewer growth opportunities. The latest catalyst? Defense. GM’s newly announced collaboration with Lockheed Martin could open the door to a completely different growth vertical. I wrote about Lockheed Martin in early May andit continues to churnslowlyhigher.Now we ask, will this partnership helpGM movetoa new level? Let’slook to the charts for answers… Technically, thestock has spent the last few months stuck in neutral, digesting that massive moveover the second half of 2025. Nowthe setup is starting to look much more constructive. A breakout to fresh highs could signalan extension of the longer-term uptrendasshares look ready to shift into a higher gear. The setup Westart by examining price action on a daily basis going back two years.There are some similarities worthmonitoring. Before sharestradedto current levels, priceconsolidatedin a similar fashionto what we are seeing today. It had a rounded bottom breakout withmeasuredupside targetsofroughly $80. Those goals were met and now we seean eerily comparable formationtaking placeat thesecurrent levels. The firstmajorleg highercame after along consolidation period.We sawarounded bottom base and significant breakouton a gap from that formation.That breakout was accompaniedby heavy volumewhich confirmed the strength of the move. After thebreakout, priceachieved its upward measuredtargetsandthe stockbegan toconsolidateagain.That brings us to today. Abovewe show the strength of a volume event on the breakout. This is what we are looking foronthatnextbreakout. The setup is there,but the timingisn’t– yet. Our RSImomentumindicatorcontinues to build strength and confirm the recentturnaround. We are far from overbought levels and have room to move highertocontinue onthisnewnear-term uptrend. Thenthere’sthe 200-day moving average. I like to call this the barometer of health. The stock tested this level on its last downturn and passedthis technical testwithflying colors. For fansof candlestick charts, youwill also notice thethree-candlemorning star reversalpatternthat marked thelows. These are strong signs ofbottomand the level from which we measure our downside risk. Next,we back thingsoutto afive-year weekly chart to see if it confirms our thesis on a longertime frame. On the weeklychartwe see a series of rounded bottom breakouts. Thestock, as we noted, appearsto be following that similar path again. Then whenwe compare the stock on a relative basisto its peers in the consumerdiscretionarysector — yes, GM is considered a discretionary stock — wesee it outperforming and trending higher. This is the strength we like: buying the strongest stocks within the sector. Lastly, we look to momentum again— this time the MACD.We are seeing a bullish crossoveron the weekly chart. This hasoccurred near bottoms consistently over the last five years and nowit ishappening again. The trade The timingisn’tideal. Wedo not havetheprice confirmationand breakout to givethe bulls the freedom tostampedehigherat this time. However, the set-up from a risk/reward perspective gives us a chance toanticipatethe move and protect ourselves if the trade stalls out. Look to add to the stockbetween its recent lows of $79and its rising 200-day moving average at $74.Use $72 asyour stop level. If sharesfail tohold this key support levelfrom theFebruary and March lows, norcanhold the rising 200-weekmoving average, then exit with a small loss. The upsidepotentialis there to reap greater rewards. If shares can continue this consolidation and breakoutand close above $84thenour next upside target over the nextseveral months isa conservative level of$98. The road is there for the stock to travelto new heights. We just need to get that breakout with some momentum. Given its recent price history and positive news momentum, thismay be time toanticipatethat exact scenario. We know the downside – now we waitfor the potentialupside tostep on the gas. Jay Woods, CMT with Chase Games DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
