General Motors Leads Auto Stock Decline

GM stock is headed for its sixth straight weekly loss

Managing Editor
May 31, 2019 at 9:44 AM
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The auto sector took a hit this morning thanks to President Donald Trump's threats to impose up to 25% tariffs on all imports from Mexico in the coming months. As the largest automaker in Mexico, General Motors Company (NYSE:GM) has been hit hardest thus far, down 4.2% to trade at $33.85. 

General Motors stock has now breached its year-to-date breakeven point. The $41 level has served as a stiff ceiling in 2019, and since its last test of that level earlier this month, GM has given back 17%. Put another way, the shares are about to rack up their sixth straight weekly loss and worst month since January 2016. Even heading into today, the security's 14-day Relative Strength Index (RSI) stood at 28 -- firmly in oversold territory.

Analyst sentiment around the auto stock remains optimistic. Of the 12 brokerages covering GM, nine rate it a "buy" or better, with zero "sells" on the books. Plus, the average 12-month price target of $47.11 sits all the way up in record-high territory. 

There's also optimism in the options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GM's 10-day put/call volume ratio of 2.54, which indicates calls outnumbered puts by a more than two-to-one margin in the past two weeks.

Echoing this, the security sports a Schaeffer's put/call open interest ratio (SOIR) of 0.48, indicating that call open interest easily surpasses put open interest among options expiring within the next three months. This SOIR is 2 percentage points from an annual low, suggesting short-term options traders have rarely been more call-biased in the past year.

 
 

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