General Motors (GM)

General Motors (GM) was upgraded today to Conviction Buy at Goldman Sachs.  Some poke fun of the CV designation as they mock it implies GS doesn’t have conviction on their other Buy ratings but I think what GS is trying to do with the designation is denote timeliness.  Something on CV is likely far from its price target and also likely or able, in GS’ mind, to move in that direction relatively quickly.  At least that is my take.  In that same light GS quoted near term catalysts for the reason for the upgrade including the potential for a dividend by year end.

In the case of GM, while the call maybe appropriate and GM may be heading higher, I think that more consolidation would be appropriate.  While GM has moved to new 52 week highs, it is not at all time highs and to make that run it looks to me that it is better to consider the name on pullbacks than right here.

Ideally I think GM needs to visit its 200 day SMA but what is yet to be seen is if GM will consolidate here/decline until it hits the 200 or will it first move to much more extended levels before the 200 touch is seen.  If I were to enter here I would likely sell some upside calls to help hedge against declines and I would also only be taking a piece of what a full position would be (maybe 1/4).  Then on any pullbacks I could put more capital to work or allow any sold puts to be exercised.