General Motors (GM) shares rallied 0.85% to $32.04 after reporting September sales of 249,795 vehicles, a beat over the 249.5K estimate, but down 0.6% year over year. GM has recaptured retail market share in 15 of the last 18 months dating back to April 2015.
GM’s vice president of U.S. sales operations noted that “GM again outperformed the retail industry and gained profitable market share. We continue to lead the retail truck industry and gained share in the two largest car segments. We are achieving these results while maintaining disciplined incentive spending and commanding the industry’s best average transaction prices for any full-line manufacturer.”
Price action on the GM daily chart shows that the since the breakaway gap formed on September 19th, price has continued to respect the 50-day SMA. If the current rally takes out the $32.40 level, we could see price extend higher towards the $33.00 handle. It is around that area that price could tentatively form a bearish Butterfly pattern. Point D is targeted with the 127.2% Fibonacci expansion level of the X to A move and the 161.8% Fibonacci expansion level of the B to C leg. If valid, price could reverse back towards the $31.50 level.
The Trade: Sell GM at $33.00 with a stop loss at $32.50 and a take profit at $31.50. The risk/reward ratio is 1:3