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Brand Face-Off: General Motors Company vs. Tesla Motors Inc (TSLA)

Evaluating GM and TSLA from technical and sentiment viewpoints

by 5/19/2014 12:00:34 PM
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Upstart electric automaker Tesla Motors Inc (NASDAQ:TSLA) is giving its more established rival General Motors Company (NYSE:GM) a run for its money. In fact, technically speaking, the former has easily outdistanced its sector peer on both an intermediate- and long-term basis.

At last check, amid reports of an internal review focused on its legal department, GM was sitting slightly in the red for the day, bringing its shares to a year-to-date deficit of roughly 17%. What's more, the stock is barely north of breakeven on a year-over-year basis, and faces an overhead level of resistance in the form of its 20-week moving average. By contrast, TSLA is in the green today, has gained nearly 30% year-to-date, and has more than doubled in value since this time last year. Also, the shares have been consolidating atop support at their 40-week trendline.

Weekly Chart of GM since December 2013 With 20-Week Moving Average
Chart courtesy of StockCharts.com

Weekly Chart of TSLA since May 2013 With 40-Week Moving Average
Chart courtesy of StockCharts.com

Despite General Motors' technical struggles, the options crowd is more bullishly aligned than usual. The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.49 indicates call open interest roughly doubles put open interest among options expiring in the next three months. If that's not enough, this SOIR is lower than 78% of comparable readings from the last year. From a contrarian perspective, a capitulation of short-term option bulls could produce headwinds for the stock.

The Street is similarly optimistic on GM. Nine out of 13 covering analysts give the shares a "strong buy" recommendation, versus just three "holds" and one "strong sell" opinion. Additionally, the stock's consensus 12-month price target of $43 sits at a considerable premium to the current share price. In other words, the door is wide open for a round of downgrades and/or price-target reductions, which could intensify selling pressure on GM.

Meanwhile, pessimism reigns in Tesla Motors' options pits. During the last 50 days on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has racked up a put/call volume ratio of 0.93, which approaches the top quartile of its annual range. An unwinding of these bearish bets could provide a lift for the stock.

Elsewhere, nearly 30% of TSLA's float is sold short, and seven out of 12 covering analysts have given the shares a "hold" or worse opinion. Consequently, the equity could potentially benefit from short-covering activity and/or analyst upgrades.

All things considered, Tesla Motors Inc (NASDAQ:TSLA) is the clear winner of this Brand Face-Off, based on its strong technicals and potential to run higher on unwinding pessimism. By contrast, General Motors Company (NYSE:GM) could get pushed even lower as the bulls begin to change their tune on the chronic underperformer.

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