Working Money magazine.  The investors' magazine.
Traders.com Advantage

INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?


PRINT THIS ARTICLE

FLAGS AND PENNANTS


GM Falls And Can't Get Up

01/03/07 01:46:16 PM
by Arthur Hill

General Motors was one of the top-performing Dow components in 2006, but 2007 is not likely to be so good for GM as a bearish continuation pattern unfolds.

Security:   GM
Position:   Sell

Even though General Motors (GM) ended the year with a sharp decline in late November, the stock was still up around 50% in 2006 — not bad for a stodgy old automaker. The November decline was quite sharp, though, and did some lasting technical damage. First, the move broke the trendline, extending up from April low. Second, the decline broke below the late September and early October lows. Third, the stock broke below its 25-week moving average for the first time since April 2006 (Figure 1), marking the start of a downtrend.

FIGURE 1: GENERAL MOTORS, WEEKLY. Despite GM's decline in late November, the stock was still up around 50% as the year ended.
Graphic provided by: TC2000.com.
Graphic provided by: Telechart 2007.
 
Turning to the daily chart (Figure 2), we can see that the stock never really recovered after the sharp decline. GM fell from 35.5 to 28.5 in two weeks and then traded flat for five weeks. Overall, the pattern looks like a sharp decline and rising flag. These are bearish continuation patterns, and a move below the lower flag trendline would signal a continuation of the November decline.

FIGURE 2: GENERAL MOTORS, DAILY. The stock appears be trading flat since the sharp decline in November.
Graphic provided by: TC2000.com.
Graphic provided by: Telechart 2007.
 
As far as indicators are concerned, downside volume has been strong and momentum is nearing resistance. The November decline occurred on big volume. There was a surge during the last few days of December, but this occurred on low holiday volume. The surge failed on January 3, 2007, as the stock declined on expanding volume. The 5-35 price oscillator rose in December but has yet to turn positive. The advance simply signals flat momentum from the flag. Look for a move below the signal line to confirm a flag break and signal a continuation lower.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
Address: Willem Geetsstraat 17
Mechelen, B2800
Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

Traders' Resource Links
TDTrader.com has not added any product or service information to TRADERS' RESOURCE.

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

Comments

Date: 01/03/07Rank: 4Comment: 
PRINT THIS ARTICLE





S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2019 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.