Lookin’ for Trouble? Just Glance at General Electric’s Stock Chart

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General Electric (NYSE:GE) finds itself a whisker away from yet another major breakdown. Last week’s earnings report had a chance at rescuing GE stock but it didn’t. And now, the fallen giant is knocking on the door of a support break, which could bring in renewed selling pressure.

Lookin' for Trouble? Just Glance at GE's Stock Chart
Source: Sundry Photography / Shutterstock.com

Today, we’re walking through GE’s grim outlook and identifying what is needed to turn the sinking ship’s chart around.

Relative Weakness Spells Danger

If General Electric were tracking the recovery of the S&P 500 index, we could interlace our analysis with some optimism. After all, the broad market is 30% off recent lows and been able to maintain the gains for almost two months now. The snapback has been historic in size and as consistent as buyers could have hoped.

Ever since the March 23 low, all selloffs have been shallow. Believe it or not, we haven’t seen more than two consecutive down days during the entire recovery. That’s a stat that confirms the bulls’ resilience, their unwillingness to let the new uptrend die. Volume patterns have been supportive along the way as well. Distribution days have all but disappeared, and participation has returned to normal.

Now, if the prior paragraph explained the performance of GE stock, then we’d be weaving a bullish narrative and pitching a way to profit on the upside. But, sadly, GE has wholly decoupled from the market. It’s been severely underperforming, exhibiting so-called relative weakness. And that’s a bad omen in our book.

Let’s take a closer look at the stock over multiple time frames.

GE Stock Charts

Source: The thinkorswim® platform from TD Ameritrade

The weekly time frame reveals a trend that spent all of 2019 in recovery mode. It carved out a nice multi-month base and even took out a few resistance levels going into year-end. The party continued in earnest into February, spurred by an earnings report that had investors cheering.

Then the novel coronavirus came to town and upended everything.

March’s unraveling slammed GE down to levels not seen since the 2008 meltdown. To the stock’s credit, it did participate in the first week of the broad market snapback. But that was it. Since then, gravity has taken hold, sucking the stock back toward the graveyard. The relative strength index is limping along near 30 in bearish fashion after March plunged the indicator into oversold territory.

The daily view reveals the stock’s demise in high definition. Moving averages across all time frames are trending lower to confirm sellers’ dominance. We haven’t closed above the 20-day moving average since April 8, and ever since the mid-March rally, an uninterrupted series of lower pivot highs has formed. Unlike the S&P 500, we’ve seen a ton of distribution cropping up over the past month.

Source: The thinkorswim® platform from TD Ameritrade

On the momentum front, the RSI breached the 50 level and fell into bearish territory in February. And there it has remained.

No Change Since February

Following the message of the price chart would have prevented you from bottom fishing. GE stock has confirmed bears are in control ever since February, and I see no evidence anything has changed since. If the company does pull a rabbit out of the hat and turn things around, then the price will let you know. Specifically, look for breakouts over resistance zones and key moving averages.

Pushing above the 20-day average and short-term resistance at $7 would be a start. If you want evidence that bulls have wrested back control of the intermediate-term trend, then wait for a move above the 50-day moving average and $8.

Until then, I’d rather short the stock than buy.

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