General Motors stock analysis next week

General Motors stock analysis next week, gm shares prices forecast next week : General Motors will react to Ford's earnings What's happening: The auto industry has been strong of late, and General Motors (GM +1.01%) has been no exception. The stock has had a bit of selling pressure since hitting its 52-week high earlier this month, but this has more to do with the current economic situation in Europe than it does with the auto market in the U.S. The auto industry has been in decline in Europe for the last 15 months, and December, new car registrations in the European Union were down 16.3%, the steepest one-month decline since 2008. GM's biggest American competitor, Ford Motor (F -1.37%) will report its fourth quarter results on January 29, and its results will have an impact on General Motors, especially any insight that Ford gives on the current condition in Europe.

Technical analysis: GM was recently trading at $28.57, down $2.11 from its 12-month high and $9.85 above its 12-month low. Technical indicators for GM are bullish and the stock is in a strong upward trend. The stock has support above $26.10. Of the 15 analysts who cover the stock 10 rate it a "strong buy," one rates it a "buy," three rate it a "hold" and one rates it a "sell." The stock receives Standard & Poor's 4 STARS "Accumulate" ranking.

Analysts' thoughts: We expect to see the American auto market to continue to improve in 2013. New vehicle offerings, a stable economy, and pickup demand remaining strong analysts believe that U.S. auto sales will eclipse the 15 million mark this year and rise above 16 million in 2014. In December, the U.S. government announced that it would sell its remaining 500 million shares of GM stock over the next 12 to 14 months, and as GM sheds the image of government control investors will be more likely to buy into the stock. We will keep a close eye on the European situation, since GM does a material amount of business in the region, but for now the U.S. market has been more than strong enough to offset the weak European market.

Stock-only trade: We do not like GM at its current level. The run-up we saw in the latter part of December appears to have been overdone and we believe there is still more room to the downside before the stock finds support. We would look to get into GM if shares were to trade below $26. We would sell the stock if it falls under $23.75 or 10% under your purchase price and take profits off the table should the stock jump above $29.75.

Option trade: If you are looking for a hedged options trade on GM, consider a March 22/27 bull-put credit spread for a 40-cent credit. That's a potential 8.7% return (62.2% annualized*) and the stock would have to fall 4.1% to cause a problem.

Speculative option trade: For those of you with an appetite for higher risk and bigger returns, consider buying the September $29 call. If GM rises just 11.9% you can pull in a 20% or better profit on the option. However, if the stock moves lower, this kind of trade could lose a significant amount.
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