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 the better comeback stories in the market. While shares are only higher by roughly 1% year to date, don’t let that fool you. GM has surged nearly 70% over the past 52 weeks as 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 bankrupt and were delisted from the NYSE in 2009. It broke my heart, but I have moved on and so have they. They returned to the NYSE in late 2010 and now, over a decade later, it’s back on my radar. This is not the same GM simply known as a cyclical auto manufacturer. The company under CEO Mary Barra’s leadership has navigated through several obstacles and is starting to see results from newer 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 and it continues to churn slowly higher. Now we ask, will this partnership help GM move to a new level? Let’s look to the charts for answers… Technically, the stock has spent the last few months stuck in neutral, digesting that massive move over the second half of 2025. Now the setup is starting to look much more constructive. A breakout to fresh highs could signal an extension of the longer-term uptrend as shares look ready to shift into a higher gear. The setup We start by examining price action on a daily basis going back two years. There are some similarities worth monitoring. Before shares traded to current levels, price consolidated in a similar fashion to what we are seeing today. It had a rounded bottom breakout with measured upside targets of roughly $80. Those goals were met and now we see an eerily comparable formation taking place at these current levels. The first major leg higher came after a long consolidation period. We saw a rounded bottom base and significant breakout on a gap from that formation. That breakout was accompanied by heavy volume which confirmed the strength of the move. After the breakout, price achieved its upward measured targets and the stock began to consolidate again. That brings us to today. Above we show the strength of a volume event on the breakout. This is what we are looking for on that next breakout. The setup is there, but the timing isn’t – yet. Our RSI momentum indicator continues to build strength and confirm the recent turnaround. We are far from overbought levels and have room to move higher to continue on this new near-term uptrend. Then there’s the 200-day moving average. I like to call this the barometer of health. The stock tested this level on its last downturn and passed this technical test with flying colors. For fans of candlestick charts, you will also notice the three-candle morning star reversal pattern that marked the lows. These are strong signs of bottom and the level from which we measure our downside risk. Next, we back things out to a five-year weekly chart to see if it confirms our thesis on a longer time frame. On the weekly chart we see a series of rounded bottom breakouts. The stock, as we noted, appears to be following that similar path again. Then when we compare the stock on a relative basis to its peers in the consumer discretionary sector — yes, GM is considered a discretionary stock — we see 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 crossover on the weekly chart. This has occurred near bottoms consistently over the last five years and now it is happening again. The trade The timing isn’t ideal. We do not have the price confirmation and breakout to give the bulls the freedom to stampede higher at this time. However, the set-up from a risk/reward perspective gives us a chance to anticipate the move and protect ourselves if the trade stalls out. Look to add to the stock between its recent lows of $79 and its rising 200-day moving average at $74. Use $72 as your stop level. If shares fail to hold this key support level from the February and March lows, nor can hold the rising 200-week moving average, then exit with a small loss. The upside potential is there to reap greater rewards. If shares can continue this consolidation and breakout and close above $84 then our next upside target over the next several months is a conservative level of $98. The road is there for the stock to travel to new heights. We just need to get that breakout with some momentum. Given its recent price history and positive news momentum, this may be time to anticipate that exact scenario. We know the downside – now we wait for the potential upside to step 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. 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