In a market plagued by the coronavirus, could General Electric (NYSE:GE) finally be in position to bring good things to life for investors? Let’s take a look at what’s happening off and on the price chart of GE stock, then issue a stronger risk-determined assessment on shares.
Shares of turnaround play General Electric, the once-mighty industrial and former Dow Industrials linchpin, have been hit hard the past couple of weeks. If you weren’t aware, the stock has hemorrhaged over 40% since the second half of February. Not that GE is alone.
Thanks to the spread of the coronavirus, man-made attempts to guard against an even larger outbreak, and investor-made mental constraints, the major averages are flirting with a bear market at Monday’s lows. And from current blue-chip titan and world’s largest publicly-traded stock Apple (NASDAQ:AAPL), to a smaller and more speculative outfit like Richard Branson’s Virgin Galactic Holdings (NYSE:SPCE), it’s been a viciously ubiquitous period for most risk assets.
Still, with painful and obvious blood in the streets and the Trump Administration floating a payroll tax cut to combat Wall Street’s illness, are shares of a well-discounted, ‘comeback kid’ General Electric now worth the risk? Some pros certainly believe so.
Just one week ago and sporting a valuation roughly 25% higher than Monday’s closing print, CNBC analyst and The Street’s James Cramer saw General Electric as an opportunity based on the solid leadership of CEO Larry Culp. In fact, Cramer looked like a kid guilty of stealing from the cookie jar when he disclosed his own “buy, buy, buy” of GE stock for his charitable trust in front of the cameras.
GE Stock Price Weekly Chart
Source: Charts by TradingView
Back in the first half of December, I cautiously warned against buying shares. At the time, I was concerned with company’s questionable ‘reassuring dividend news.’ As well, overbought conditions as shares hit technical price resistance had our attention. The counsel was both right and wrong … and then some.
December’s outlook for General Electric’s share price was fairly accurate over the next couple of weeks as the stock largely stalled in its tracks. The warning was also clearly wrong. It’s also true GE then proceeded to rally strongly to new relative highs into February. Now though, a targeted and slightly compromised $8.50 – $9.75 forecast is readying for a fresh ‘buy, buy, buy’ recommendation.
Technically and as the provided weekly chart illustrates, shares have broken beneath classic trend and Fibonacci support used in our initial estimate of GE stock’s downside risk. But life and investing are rarely perfect. And in lieu of the market’s bearish pandemic, the forecast has proven more correct than wrong. More importantly, given today’s oversold test of the 76% support level and a developing higher-low pattern, the price action has us seeing and believing GE is nearly ready to bring good things to life for investors.
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 options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
