Can GE Get Up Off the Mat?

General Electric (GE - commentary - Cramer's Take) has been the poster child for this bear market. The company has financial, cyclical and heavy international exposure. However, it is positioned right at the crossroads of the financial crisis, and the stock has suffered accordingly. The question now is whether or not the stock price has fully accounted for the disaster and are traders starting to look "around the bend" for bullish changes.

We see some interesting technical changes in GE that could lead to a short-term countertrend rally in the name, but it remains too early to look for a significant change in the longer-term bear market dynamics of the chart. We think GE is a good candidate for a short-term trade to the upside from these levels, especially with the almost 8% dividend yield in the stock, which should provide some support and draw in value buyers.

General Electric

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General Electric is being viewed as a financial name at the moment, and the stock is moving lower in this last leg in lock step with the financial sector. GE depends on the issuance of debt to finance operations, and the freezing of the credit markets is obviously a massive problem for the company. The government has provided access to the Fed's commercial-paper facility, which should smooth out the short-term credit problems for the company.

GE doesn't hold any of the really toxic financial instruments at the heart of this crisis, but we doubt traders are in the mood to make that distinction at the moment. The company has stated that the dividend yield is secure and will not be cut, but we also doubt that traders believe that at the moment either.

Now if we throw in the global economic recession and the fact that GE gets 50% of its orders from overseas, as well as the idea of a global cyclical downturn for industrial products of all kinds, and we can see why traders are abandoning the name. The bearish fundamental case for GE is compelling, but we believe the bears have taken the stock too far to the downside and there is a good chance for a strong countertrend rally from the current levels.

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At the time of publication, John Hughes and Scott Maragioglio had no positions in the stocks mentioned. Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.