General Electric Co. (NYSE: GE) has ridden the bull market handily higher — until lately. The conglomerate is doing everything it can think of to be valued as an industrial conglomerate rather than as a conglomerate mixed with massive consumer finance. GE’s performance since before earnings has been lackluster at best, with shares down 6% so far from the peak of July. GE’s chart is another matter, and technicians could start sounding the alarm bells.
24/7 Wall St. has pulled the GE chart from StockCharts.com going back over the past 3 years. The way GE shares have traded since earnings and into the Synchrony Financial (NYSE: SYF) initial public offering (IPO) has been atrocious. That is true even if GE shares recovered by two cents on Friday to $25.35 on a day that the Dow Jones Industrial Average was down. GE’s drop on Thursday was slightly worse than the broad market when the Dow fell some 317 points.
What you will see is that GE has broken a massive support line at the 200-day moving average. After having hit a multiyear high right at the end of 2013 and to start 2014, GE shares pulled back from just above a peak of $28 down to the $24 level in the first six weeks of 2014. GE’s stock price then recovered to $27.50 by June, but it has only been a series of lower highs.
For a stock like GE to break its 20-day or 50-day moving average is really of no relevance on a long-term basis. But to break the notorious 200-day moving average is very important. After blowing through the 200-day moving average on the upside in late 2011 (around $16 at the time), GE has made several runs at the 200-day moving average on downside pullbacks. GE tested that key 200-day moving average six times, with either no violation or minor violations, over the past two years or so. The problem was this seventh time that GE tested its key 200-day moving average — and it failed to hold support, and has failed miserably.
GE’s stock did manage to close up on Friday when the broad market did not. Perhaps investors have said that is enough of a drop. Perhaps they thought the 200-day moving average doesn’t matter. Perhaps they think there is enough of a discount in GE now to other conglomerates that the end result from its efforts to transform the company are enough. GE has several issues happening at once now:
- Its Synchrony consumer finance IPO has taken place, with an expected spin-off of the rest in 2015.
- GE is now reportedly reviewing its appliances division for a potential sale again.
- GE’s recent acquisition of Alstom in Europe is a $17 billion deal, its largest to date.
- GE trades at a reasonable 13.8 times expected 2015 earnings.
24/7 Wall St. would like to impress one notion on technical analysis for our readers. By the time technicians actually confirm technical damage or recovery, much of the move has already happened. Sometimes the technical event marks the extreme or apex of the move as well. That being said, GE technicians likely will warn that either this means trouble for GE or that GE will not recover as fast as the broader market if the market turns back up.
GE closed at $25.35 on Friday. Its 50-day moving average is up at $26.42, and the 200-day moving average is up at $25.99. The chart from StockCharts.com is below.