The Bull, Bear Case For General Motors Stock Following Disappointing Q2 Earnings Print

General Motors Company GM was sliding about 2.5% lower intraday on Tuesday after printing worse-than-expected second-quarter EPS results.

The legacy-turning-EV maker blamed supply chain constraints and said 95,000 of its vehicles are sitting on the assembly line waiting for chips. For the quarter, GM reported earnings per share of $1.14 on revenues of $35.76 billion. On average, analysts estimated the company would report earnings per share of $1.30 on revenues of $34.59 billion.

Following the results, JP Morgan analyst Ryan Brinkman weighed in on GM to re-rate the stock. Although Brinkman maintained the Overweight rating on GM, he lowered the price target from $64 to $61, which still suggests about 82% upside.

GM said it expects to meet its full-year earnings guidance and is optimistic it can regain market share in China.

Despite negative reaction to GM’s earnings print, the stock may have now confirmed an uptrend. In fact, the automaker was in need of a higher low on the daily chart, which has now possibly printed.

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The General Motors Chart: GM reversed course into a possible uptrend on July 13 after printing a double bottom at the $30.33 level on that date and on July 5. If Tuesday’s low-of-day serves as a higher low within the pattern, traders can expect GM to print a higher high above the high of $35.20, which was formed on July 22.

• If GM closes Tuesday’s trading session above the $33.50 level, the stock will print a hammer candlestick on the daily chart, which when found on a dip can indicate the low is in and the stock will trade higher in the future. If GM is able to soar up over the coming days to print a higher high, it will also regain the 50-day simple moving average as support, which would give bulls more confidence going forward.
• Surprisingly, the lower prices on Tuesday were being created on lower-than-average volume, which likely indicates consolidation as opposed to fear selling. At press time, about 6.3 million GM shares had exchanged hands, compared to the 10-day average of 13.86 million.
• If big bearish pressure comes in later on Tuesday to force GM to close near the low of day price, the stock will print a bearish kicker candlestick, which could indicate lower prices will come again on Wednesday. In that case, bearish traders will want to see momentum drop the stock under the $30 mark, which would indicate the recent upturn in GM was a bull trap.
• GM has resistance above at $35.38 and $38.03 and support below at $33.33 and $31.56.

See Also: General Motor's Joint Venture To Receive $2.5B Government Loan For Upcoming Battery Plants In US

Photo: Courtesy of Tawheed Manzoor on flickr