We just saw a military strike generations of US presidents have avoided...yet stocks took a sizable step back toward record highs. Oil prices actually shifted down, defying all “conventional wisdom” that escalation in the Middle East would endanger global energy transit routes. I like our options trade in General Motors Co. (GM) here, notes Hilary Kramer, editor of High-Octane Trader.
We can argue elsewhere whether this market bullishness is justified by either corporate fundamentals or “animal spirits.” For our purposes, the only important thing is that the bulls clearly have what it takes right now to overcome just about any obstacle.
The big benchmarks are now trading in a narrow channel about 1%-2% from all-time highs. It will only take a little more relief to trigger a breakout move and confirm to everyone that we’re still in a long-term bull market.
General Motors Co. (GM)
With GM, we have about four weeks for our current calls to mature, factoring in the long July 4 break next week. It’s an easier chart to decode because it’s stuck in a groove between 50-day support around $47 and 200-day resistance a little above $49.
The recent unpleasantness did not crack that support, although it came close before the stock recovered. As long as the 50-day line holds, we stay in the money. And from there, the question is what our calls will be worth in the coming month.
A move back to test the 200-day line suggests intrinsic value of more than $2. Even a little test above could give us a profitable exit. Can the bulls take GM to $51 in the coming month? I like our odds.
