General Electric Is Exhausted and Needs a Rest

GE investors should wait for the stock to experience a healthy pullback before it can refresh its rally.
By Gary Morrow ,

General Electric (GE) - Get Report has been under a heavy accumulation wave all month. Last week was the stock's heaviest positive week of trade since shares began to recover from the 2008/2009 collapse. On Monday, the stock posted its biggest volume day of the month but was unable to retest the November peak, which it reached last week.

For GE investors, this inability to extend the current rally into fresh high ground, despite extremely aggressive buying, should be viewed as a warning sign. Waiting for a healthy pullback may prove wise for investors in the near term.

The rally off the Aug. 24 low has been huge for GE. At last week's peak, the stock was up nearly 60% from that spike low. The stock consolidated in September before beginning the second stage of this major bull move on Oct. 5. Since this phase began, GE has been moving higher in a near vertical run. The result has been an extremely overbought daily moving average convergence/divergence reading that has made further upside difficult.

Since early last week, GE has been supported by the October peak, but this area may give way soon. Investors should focus on the initial 2015 high, set back in April, as a pullback target. This level marks the top layer of a major support zone that includes the 2013/2014 highs. A light-volume pullback to this area followed by a base-building period will refresh the rally and give patient bulls a very low-risk entry opportunity.


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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long GE.

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