General Electric Company (NYSE:GE) has been the Rodney Dangerfield of stocks in 2017. But worse yet for bulls, GE stock is looking less likely to bring anything good to life on and off the price chart, based on the influential actions of one of the market’s most storied and respected investors.
GE stock has been the worst this year for investors. Shares have shed more than 21% this year.
Maybe worse, General Electric has bucked the Dow Jones Industrial Average’s own all-time-highs and year-to-date gains of around 10% and established the industrial conglomerate as the dog of dogs within the revered market barometer.
Is it enough to think the end could be near, at least as far as the pain GE stock bulls have endured during the market’s historic rally? Bottom line and after a significant price decline, a rotation back into the name by value-seeking investors is certainly approachable, given a below-market multiple and generous dividend. Plus, let’s face it — it’s GE for Christ’s sake!
Unfortunately and despite all the potentially good reasons to think GE stock is poised to rebound, with Warren Buffett’s Berkshire Hathaway unloading its entire position of General Electric, think again.
Because the other bottom line, and one worth respecting, is Berkshire Hathaway’s willingness to exit their investment. That action strongly suggests GE stock is still far removed from those truly interesting blood-in-the-streets opportunities worth buying into.
GE Stock Weekly Chart
Looking at the weekly chart of General Electric, aside from the obvious lack of respect and almost comedic decline in 2017, there’s also little in the way of technical backing to suggest shares aren’t headed lower.
After failing to find support last month near the 50% retracement level and a key price gap, GE stock is testing the 62% level for support. Couldn’t that line stop the pain? It could — anything is possible. As well, stochastics suggests shares are modestly oversold coupled with a positive divergence.
From that vantage point, GE stock could potentially be a buying opportunity. Personally though, for those inclined to use this combination as a signal to purchase shares, using weekly candlestick confirmation of a low being in makes sense, as a technical failure to hold could prove disastrous.
Another sort of bottom line, a breakdown below the 62% level, builds the case of a more aggressive decline as forthcoming. In fact, from a Fibonacci perspective, price pressure could eventually challenge the lows of the flash crash in August 2015 near $19.50. Were that to occur, even Warren might agree GE stock might finally bring good things to life for shareholders.
GE Stock Long Put
Given our belief that the path of least resistance is still lower and after reviewing GE stock’s options for ideas, the Oct $24/$23 bear put spread looks attractive.
With shares of General Electric at $24.66, the vertical is priced for 27 cents. Risk is limited to the initial debit, or just more than 1% of the price of GE stock.
On the downside, the spread offers a max payout of 73 cents or return of 270% below $23 if some of our concerns expressed above make their way into shares. And with the market entering a seasonally weak calendar period, capturing that profit looks reasonable given the big picture of where past incidences of blood in the streets has occurred.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits and feel free to click here to learn more about how to design better positions using options!
