Shares of General Motors (GM) went hyperbolic in September gaining 25% in just six weeks. Over the intermediate term that trend should remain in place, but over the short term the stock could be preparing for a pullback.
An eveningstar pattern has formed on the daily chart. This is a three-period bearish reversal candle pattern consisting of a large white or up-day candle, followed by a narrow opening and closing range “doji” candle, and completed by a large dark or down-day candle. It represents a shift in trader sentiment from bullishness-to-bearishness.
The stock is overbought as the RSI indicates and that coupled with the eveningstar pattern suggests a pullback may be required to digest the recent gains. Chaikin money flow, however, reflects buying interest and the reading suggests that any pullback will be limited, as traders who missed the September rally look to enter the trade at a lower price.
Like all candle patterns, the eveningstar requires follow-through confirmation.