General Electric (NYSE:GE) is an emotional stock for traders. The bulls still dream of GE stock’s former glory while the bears think that the company itself is broken.
Just this morning a JP Morgan analyst reiterated his underweight rating on GE stock so I am sure it will be under pressure in today’s trading.
While I am not a perma-fan of GE, I do believe that they will figure it out. The company is too large and important for the whole world, and this very prolonged tizzy shall pass. So if I have to choose between zero and a recovery I would bet on neither, but I will bet there is upside from current levels.
In early April, I wrote about buying the shares on the negative rhetoric and that trade worked out well. I still see two ways of trading GE from here. The first is to buy it as a long-term speculative investment, like I would do for say Uber (NYSE:UBER) or Beyond Meat (NASDAQ:BYND).
Except GE has a lower bar to jump over than the other speculative stocks.
The second way to trade General Electric stock is to do so actively around the short-term levels based on the technicals.
Fundamentally it’s hard to gauge if GE stock is cheap because they are trying to streamline their income statement to steer the ship into a better direction for the long term. But it’s only selling at a mid fraction of its sales so it’s not likely bloated.
The stock is out-performing the S&P 500 this year three to one so it’s not been a terrible 2019. The stock has had two table top levels at $8 and $9 per share this year. Each served as a 13% rally.
The latest spike is fading as the stock falls back into the $9 zone. This served as the neckline for the last spike so it’s okay to revisit it to confirm it as footing. But the danger would be that if it doesn’t hold then it could trigger a bearish pattern to retest the prior breakout level at $8 per share.
The good news for the GE stock bulls is that this level here has already held up against its last test during its most recent earnings period. So onus is on the bears to break through the floor. Until then I can assume it’s support until it fails.
The risk here is from the geopolitical environment. The macro headlines are very bearish these days and the tariff headlines could drag the whole market down and cause GE to lose its footing too. The next real test comes as we approach the June 10th deadline of new tariffs with Mexico boarder squabble.
If I own GE shares for the long term, I change nothing with my position unless I have reason to believe that my thesis is now invalid. But if I own it for the short term, there are lines that I need to know.
There are two important support lines at $9 and $8.75 per share. If lost they could invite momentum sellers to target the prior breakout level around $8 per share. Although this is not a forecast, it is a possible scenario from here.
The GE stock range is tightening with lower highs, so once the bulls break out of this descending trend line they can target the next breakout zone around $10.50 per share. But there will be resistance around $9.65 and $10.10.
Basically we have dueling inverse patterns at either end of GE’s trading range. Since my overall thesis is constructive on stocks, I favor the upside scenario.
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