Can General Motors Move Higher?

With shares of General Motors (NYSE:GM) trading around $36, is GM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

General Motors designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide. The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, and Vauxhall brand names, as well as under the Alpheon, Jiefang, Baojun, and Wuling brand names. It sells cars and trucks to dealers for consumer retail sales, as well as to fleet customers in daily rental car companies, commercial fleet customers, leasing companies, and governments.

General Motors CEO Mary Barra apologized again for the flawed ignition switch tied to at least 13 deaths at the shareholder annual meeting, saying the company is poised to succeed despite the recall crisis. “I have and will be guided by two clear principles: to do the right thing for those that were harmed and to make sure we accept responsibility for our mistakes and commit to doing everything within our power to prevent this problem from ever happening again,” she said. Barra insisted the company is doing well despite the controversy about the ignition switch recall, which was delayed for at least 10 years. She pointed to strong profits and to the fact that General Motors posted its best sales since 2008 in May.

T = Technicals on the Stock Chart Are Mixed

General Motors stock has struggled to make positive progress in the past several years. The stock is currently trading sideways and may need time to consolidate. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, General Motors is trading between its rising key averages, which signals neutral price action in the near-term.

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of General Motors options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

General Motors options

25.44%

63%

60%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Average

Average

August Options

Average

Average

As of Tuesday, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.