How Europe-free GM and other auto stocks could rack up a ‘massive breakout’ – MarketWatch

Posted: Monday, March 06, 2017

A $2.3 billion deal is shaking up car stocks Monday, adding to some bullish buzz around the industry.

Shares in Peugeot SA

UG, +3.70%

are rallying about 4%, after the French auto maker agreed to buy General Motors Co.’s European car brands.

News about a possible sale first came in mid-February, boosting both Peugeot  and GM’s

GM, +1.24%


The companies now have inked a deal, with Peugeot promising to pay $1.4 billion for GM’s Opel and Vauxhall brands. The U.S. car giant’s European financial operations are to be jointly acquired by Peugeot and French bank BNP Paribas SA

BNP, -0.83%

 for about $950 million. As part of the overall deal, GM will take a $4 billion charge.

Jonathan Krinsky, chief market technician at MKM Partners, sounded upbeat about the car industry in a note over the weekend, before details of the $2.3 billion deal rolled in.

“We see a potential massive breakout in auto makers vs. auto retailers after a ~600% underperformance over the last 11 years,” the technical analyst said in a note dated Sunday.

These are the motor-vehicle makers that Krinsky recommends buying: GM, Harley-Davidson

HOG, +0.31%

 , Ferrari NV

RACE, +0.45%

 , Peugeot, Volkswagen

VOW, -0.78%

 , Renault SA

RNO, -0.37%

 and Yamaha Motor Co.

7272, +0.38%


And these are the auto-parts retailers that he says to sell: Advance Auto Parts Inc.

AAP, -1.28%

 , AutoNation Inc.

AN, -1.34%

 , AutoZone Inc.

AZO, -1.13%

 and Genuine Parts Co.

GPC, -1.22%


The chart watcher offered this illustration as he suggested this is car manufacturers’ moment:


Krinsky also shared this chart showing the recent leap by GM’s stock, which was trading lower in premarket action Monday:


And the MKM technician highlighted these chart setups for American and European auto makers, suggesting there could be more gains ahead:


To be sure, other stock pundits are downbeat on companies who are producing motor vehicles. Barron’s, for example, has argued motorcycle giant Harley “could be headed for a nasty spill.”


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