GM forming a possible bottom formation

15 thg 9, 2011

GM has an interesting trade setup: This is either a setup for a rally after its prolonged selloff or just a resting place before the next downleg occurs. The #1 selloff consumed 5 days. The #2 was 4 days. The #3 was 3 days. And now the downtrend line is close to being violated (if it closes above it) and a rebound is possible. The risk is to the 3-day low or $21.48. The reward is to $24.90, the low close prior to the gap-down the following day which represents aggressive sellers. The ratio of risk to reward isn't great at 1.10 risk to 2.32 reward, but perhaps this trade is more probable to be successful. Full disclosure, I have a position in GM shares.