EDITOR’S NOTE: Tyler Craig will return to Beat the Bell on Tuesday, July 25. Chris Tyler brings you today’s Beat the Bell.
Apparently General Electric Company (NYSE:GE) is still having problems appeasing some investors following its latest corporate confessional. Nevertheless, I advise you not to lose sight of the bigger picture. GE stock is starting to look ready to bring good things to life once more.
As any active investor with an eye on the Dow Jones Industrial Average is aware, General Electric didn’t exactly earn immediate respect after it released its Q2 results this past Friday. Some would say the company’s failure to give full-year guidance for 2018 played a large part.
Others might state the problem is that GE needs a solid second half to ensure proper cash flow from operations.
Maybe also lending a hand in Friday’s roughly 3% drop in GE stock — which has shares testing two-year lows — is the looming departure of Jeffrey Immelt, the company’s CEO of the past 16 years.
Between those worries and the fact Wall Street is so sour on General Electric’s prospects, I think it’s prudent to remind investors not to lose sight of the whole picture, which includes what’s actually going right for the company.
General Electric beat top- and bottom-line forecasts. The company did announce full-year views slightly above the midpoint of consensus estimates. GE is generating sufficient cash to sustain its dividend, which some had questioned in recent months. And that management reset up top? Already a much leaner and focused conglomerate thanks in large part to Immelt’s vision, the CEO slot is being filled by John Flannery, General Electric’s former head of healthcare and a person with a reputation for executing.
Given some time I think GE stock should be OK. And as it stands, the incoming CEO stands ready to deliver full-year 2018 guidance in November after a short period of kicking the proverbial tires that’s already underway.
While it’s all been downhill of late, an end to the suffering could be near.
General Electric’s Chart
Click to Enlarge
Following Friday’s weak earnings reaction, shares of General Electric stock have established an engulfing candlestick into a key support zone. The area is backed by the 50% and 62% Fibonacci levels and a bullish gap fill. Stochastics is also showing a bit of promising positive divergence.
It’s far from perfect, and GE stock does have its work cut out for it.
In fact, the aforementioned weekly candlestick is actually bearish as shares closed lower on the week in the bottom portion of the price range. Optimistically, but without being too hopeful, I do think General Electric is in a position to move higher.
One sign indicating the end of a painful decline could be nearby is Friday’s drop of 2.92%. On the daily chart the price action is actually quite bullish. While it doesn’t show up on the provided weekly chart, the fact is GE stock did manage to finish the session at the top of its trading range and far removed from the opening print and session lows.
What’s Next?
I’ll be keeping an eye on GE’s ability to rally further and above the high of last week’s engulfing candle. A move through $27.05 would signal a failure by bears to break key technical support.
If that happens, that would go a long way toward validating General Electric’s ability to finally give shareholders what they want in the coming months.
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
