Berkshire Boosts GM Stake

On Tuesday, Berkshire Hathaway (NYSE: BRK) announced that it increased its stake in Wal-Mart (NYSE: WMT) and General Motors (NYSE: GM).  After the filing, many investors hope that these two stocks will reverse course and begin to climb higher once again.

On Wednesday, each of the stocks got the Berkshire bounce. WMT was barely 1% higher than Tuesday’s close, while GM increased 4% to $22.26 at the open.

GM shares could really use the help. The stock has fallen from $27.50 to $21.50 during the past 50 days. That move followed a decline from $38 last year.

Despite the help from Berkshire, GM is in trouble. The shares have a clear resistance area at $27 (horizontal blue line) that will be a challenge to overcome.

In addition to the $27 resistance zone, the shares will also encounter pressure near the 50-day moving average (black line) near $24. This is a level that GM shares have been unable to hold since early April.

The near-term optimism could propel GM back to the $24 area.  And if the market turns around, the stock could gather momentum and rise back to $27. Over the longer term, I don’t see much upside and expect GM will test $19.