Another False Start In General Motors?

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General Motors Company GM shares are trading higher by $1.07 (3 percent) at $32.04 in Monday's session. The catalyst for the rally is an upgrade from Morgan Stanley along with a price target raise from $29 to $37.

Adam Jonas is widely respected in the automotive sector and has made several good calls in the past. The fact that he raised his target so much is very significant in and of itself, especially if one has been bullish on the issue, but waited for an entry point closer to $30 area.

False Start?

However, is today's rally just another false start in the issue, which we have witnessed on several occasions? For example, the issue bolted to $32.87 on July 21, on the heels of blowout Q2 report that included an EPS beat of $0.37 along with nearly a $4 billion revenue. That marks the fifth EPS beat in the last six quarters, coupled with four revenue beats over that same time period.

Related Link: Adam Jonas Upgrades General Motors: Still Plenty Of 'Cars With Steering Wheels Left To Sell'

Unfortunately for longs in the issue, the majority of gains from that report were given back as the issue ended that session at $32.03. Within eight trading sessions, it was back at the $30 area.

When an issue can't go up on good news, one has to contemplate what would have happened to issue on bad news, such as a big EPS or revenue miss.

Buffett Impact

The bullish case for the issue is that it's a large holding of one of the most well-respected investors of all-time, Warren Buffett. As of his last filing, he has a large stake in the issue and is content to get paid to wait in the issue as it yields a lofty 4.9 percent.

From a technical perspective, the price action over the next few days may determine its next extended move. If in fact it can maintain today's gains, it may be a sign that this rally is for real and may be heading for its yearly high of $33.54. If not, investors may just have another opportunity to attempt a long entry closer to the $30 area.

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Posted In: TechnicalsIntraday UpdateMoversTrading Ideas
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