Three Ways to Look at GE

Updated from 11:41 a.m. EDT

Today, let's look at the long-term history of General Electric (GE Quote - Cramer on GE - Stock Picks) and note levels that might come into play as we head through 2008 and into the next decade. This will allow us to find the perfect time to reconsider this instrument for our portfolios.

GE rose relentlessly from the mid 1980s into the new millennium as the blue-chip giant found its way into the portfolios of institutions and baby boomers worldwide. The uptrend ended with the breaking of the tech bubble, even though this bastion of American capitalism had few interests in the dot-com mania.

The company's progress since the last bear market ended in 2002 has been disappointing to say the least. It's underperformed other Dow components by a wide margin and just can't seem to find sustained buying interest. The real culprit behind its weak price action has been the falling dollar, the inverse scenario it enjoyed for more than a decade.

There's evidence to suggest the falling dollar may be near a historic crescendo that finally turns the greenback for a period of months or years. This could be a positive for the company, as folks remember why they loved the stocks ten years ago. In the meantime, all we can do is to wait and see how this issue trades vis-à-vis the broad indices.

It may not be tomorrow or next month, but sooner or later, this issue could bring good things to life.

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GE (Monthly)

Click here for larger image.

Source: eSignal

The stock moved higher in a steady uptrend through the 1990s, with a brief detour during the 1998 Asian contagion. It finally topped out at $60.75 in September 2000 and sold off with the broad market. Price bottomed out in October 2002 and successfully tested that low just before the Iraq War began in early 2003.

The recovery effort unfolded as it did with other stocks pulverized by the 2000-to-2002 downtrend, with a sharp thrust higher followed by a steady uptrend that lasted well into 2004. The instrument topped out at $37.75 in December of that year and dropped into a sideways pattern that lasted for the next 30 months.

The stock finally broke out in June 2006 and headed up to five-year highs. Note the series of monthly spikes right after the four-month rally that followed the Sept. 11 attacks. The 2007 rally into this long-term resistance level marked the top of the breakout and start of a decline that accelerated to the downside with lightning speed.

The uptrend between 2003 and 2007 carved out a series of higher lows that generated a rising trend line, which was broken on high volume during the January selloff. This is a big deal, precisely because it's happened on the long-term chart. It denotes a major loss of faith with the issue that could easily take years to overcome.

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GE (Weekly)

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Source: eSignal

The weekly chart shows a stock that's essentially run in place since 2005. In particular, note the triangular price action between 2006 and the present. This marks out a "first failure" pattern that signifies an early warning signal for a larger-scale top or reversal.

The obvious line in the sand here is the support line at $32. The stock dropped under that price level last week but jumped higher and added to its gains during Monday's reversal. As long as this line holds up, a notable recovery rally could build from current levels. But that might just support a trade and not a long-term investment, given the broken trend line.

What's the downside exposure if this support level finally breaks? A series of lows in the mid- to upper $20s, posted in 2003 and 2004, should hold declining price for a long time. That wouldn't be too bad in this wicked market environment. The company's quarterly dividend would also relieve some of the downside pressure if that happens.

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GE (Daily)

Click here for larger image.

Source: eSignal

Finally, let's zoom into the daily view and examine General Electric's shorter-term outlook. Note the downtrending line created by the declining highs off the October reversal. Price rallied up to this resistance level last week, and it looks like it's going to power through it. This is a positive development that points to additional upside into April.

Unfortunately, the 200-day moving average is sitting just 2 points above the current price. Notably, this level also corresponds with the monthly trend line broken earlier this year. The convergence limits the upside considerably and warns that the stock will need an extended period of basing and consolidation before it's ready to challenge the 2007 high.

Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter. Know What You Own: General Electric is a component of the Dow Jones Index, and some of the other stocks in that index include JPMorgan (JPM Quote - Cramer on JPM - Stock Picks), Exxon Mobil (XOM Quote - Cramer on XOM - Stock Picks), Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks), Pfizer (PFE Quote - Cramer on PFE - Stock Picks), Wal-Mart (WMT Quote - Cramer on WMT - Stock Picks) and Intel (INTC Quote - Cramer on INTC - Stock Picks). These stocks were recently trading at ($42.60, +5.68%), ($87.44, +1.92%), ($28.88, +2.05%), ($20.85, +1.36%), ($50.69, +1.48%) and ($21.37, +2.49%) respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.