Auto sector: time for a test drive?

 

I was asked on my last BNN appearance about my opinion on GM, the largest auto seller in the world. “The General” received some unfavourable press recently surrounding ignition switch faults that resulted in deaths and injuries. The stock fell from its December 2013 of around $41 to a recent low of $32 before beginning to build a base.

gm

 

 

 

 

 

 

 

 

 

 

 

I told the caller not to buy GM until it breaks its base neckline around $36. Instead, I suggested she look at Ford – which does appear to be breaking its $16.50 base neckline at the top of an ascending triangle formation that began forming this year.

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Volkswagen AG, the second largest in auto sales in the world (9.5 million sold vs. 9.7 million for GM in 2013) has been in an uptrend, and is currently stalling a bit at $53/share. I’d avoid the stock until that resistance point is taken out.

 

VW

 

 

 

 

 

 

 

 

 

 

 

Toyota had a pretty significant selloff throughout last year, no doubt influenced by the Yen’s 30% + drop. It is possible that the Yen is in the midst of forming a Phase 1 base bottom. It looks like it has been trying to form an ascending triangle, but a breakout to the upside will be needed to confirm that potential. Note that, according to classic technical analysis, we have still to see a higher low before a break in the yen’s downtrend is confirmed. Fundamental analyst, Craig Aucoin here at ValueTrend noted that Japan has recently seen some inflation statistics come through – which, if proven to be a trend, should ultimately prove to be positive for that currency.

 

Yen

A stronger Yen in conjunction with the base breakout experienced recently in TM’s price could spell opportunity on this auto stock.

TM

Honda (HMC) is bouncing off of a support zone. It too would be influenced by the Yen, which, if bullish, could positively influence the stock price. The stock has been far more erratic than the other stocks mentioned above, so it might be considered the most volatile of the gang presented here. More aggressive traders might consider a long position on this stock.

HMC

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