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General Motors Is On The Cusp Of A Breakout

Summary

I believe that August sales figure was a positive one.

Fundamental developments will lead to stock price appreciation.

Technicals also favor a bullish move.

General Motors (NYSE: GM) is on the cusp of a bullish breakout and investors can hope for at least 10 percent gains in the coming weeks.

Roughly two weeks ago, I wrote an analysis titled, General Motors: It Can't Be Helped, in which I said that fear is keeping investors away from this fundamentally strong company. I have some reasons, both fundamental and technical, to believe that investors are now ready to get their feet wet.

I See Nothing Wrong In August Sales

A week before the August auto sales numbers were announced, Edmunds.com reported that GM's sales would fall off 5.7% for the month, while Kelly Blue Book saw a 5.4% drop. General Motors was also expected to report a loss of market share. General Motors conveniently proved all the naysayers wrong.

The company's unit sales came in at 5.2%, and the retail market share increased 50 bps during the month despite the sales dip.

Let's think beyond the numbers here for a moment. The U.S. automobile industry is under slight stress. There is no doubt about it. But, it is not so big of a problem that cannot be handled. All businesses face such times. Companies such as General Motors and Ford (NYSE:F) know how to manage inventory well, and offering incentives is a part of the business operations. It necessarily doesn't reek of desperation as many claim it to be.

I want to state here that the exaggerated pessimism cannot sustain forever. Long-term...


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