How Far General Electric Can Rally if It Breaks Out

General Electric continues to trade pretty well, although it remains just below the March high. Here's how to trade it now.
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It’s been a tough run for General Electric  (GE) - Get Report. Just when the company looked like it was digging its way out of a multi-year collapse, COVID-19 hit.

Not only did the supply chain and economic disruption deal a swift blow to GE, but the impact to the travel industry (and thus, its aviation unit) hit the company where it hurt the most.

Adding insult to injury, Boeing’s  (BA) - Get Report 737 MAX issues weighed on GE too.

All in all, it was a painful year with painful results. However, after we’ve seen General Electric make it through the worst of it, CEO Larry Culp and his team have been trying to turn the corner.

It's why we were buyers of the earnings dip in April. 

GE is generating decent growth and this year’s industrial free cash flow should be strong. Further, the aviation industry is bouncing back and Boeing’s 737 MAX is back in action.

In fact, reports recently surfaced that Boeing was looking to increase production of the jet in the not-too-distant future.

With this improvement has come a bounce in the stock price. But the question is: How far can this rally take GE? Let’s look at the chart.

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Trading General Electric

Daily chart of General Electric stock.

Daily chart of General Electric stock.

Notice how shares topped out at $13.26 in February 2020 and gapped aggressively below $12.25 a few weeks later. That $12.25 level became an important breakout spot almost a year later.

Once GE cleared this level, it held it as support. It also did so with the declining 200-week moving average. Those are important developments for the bulls to keep an eye on.

Despite some recent volatility, General Electric stock continues to hold up over the 10-week moving average.

Although the stock technically topped out several months ago in early March, GE’s chart remains rather bullish. Retesting those highs now, bulls are looking for a breakout over $14.40.

Above $14.40 could put $15 in play. Above $15 and the 2018 breakdown spot could be on the table near $16.75. 

Should General Electric stock clear all of these levels, the 161.8% extension near $18 could be a possible longer term target.

On the downside, a break of the 10-day moving average puts the $13.26 mark back in play, along with the 21-week moving average. Below all of these marks and a retest of that key $12.25 level could be on the table.