General Motors stock began its uptrend in July 2012 at a price of 18.80 and made an impressive run to 41.66 in December 2013. Unfortunately, what happened next came as a surprise to the majority of investors, who thought the uptrend had just started. In less than a year General Motors fell to as low as 28.80. Are better times coming or this stock will continue to repel investors?
The Elliott Wave Principle has a reputation of an analysis method, which allows you to make a better judgement by eliminating emotions. Overoptimism was ruling over investors in December 2013 and the result was not good at all. Now we will try to get rid of the other pole of emotions, which probably guides the majority’s attitude towards General Motors after a 30% decline – extreme pessimism. The chart below shows the time period we were talking about in the first paragraph as well as the Elliott Wave labeling.
As visible, the previous uptrend can be counted as a five-wave impulse. The theory states, that every impulse is followed by a three-wave correction in the opposite direction. This means the decline, which followed, is just the second part of the 5-3 Elliott Wave cycle. The retracement looks like a double zig-zag, labeled W-X-Y, which seems to be already over. If this is the correct count, we should expect the trend to resume in the direction of the five-wave sequence. In our opinion, investors should not be giving up on General Motors yet.
GM headquarters image by: www.arrajol.com
