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Can Investors Bank on General Electric Ahead of Earnings?

General Electric has looked much better this month, with the exception of the last three days. Can investors count on the stock ahead of earnings?

General Electric  (GE)  had been rallying hard over the past few weeks. However, the last three days have not been impressive, including Tuesday.

Shares were down about 3% on the day even with the S&P 500 in and out positive territory. GE now sports a loss of 11% from its three-day high.

Reporting earnings alongside Boeing  (BA)  on Wednesday should help shed some light on the industrial and aerospace industries. It could either be a big catalyst for the two - which work together - or be another disappointing quarterly result.

When I last examined GE stock a few weeks ago, shares were recovering from a recent false breakout. However, that false move led to a retest of support, which held, followed by a strong rally despite negative news. 

After reportedly receiving a Wells Notice, one would have expected support to be breaking down - not resistance. Let’s look at the stock now that it hit the higher of our two price targets.

Trading General Electric

Daily chart of GE stock.

Daily chart of GE stock.

When I last broke down the charts, I said, “if it can clear these areas [$7, $7.17 and $7.31], it could open the door to the 200-day moving average and $8.50 mark.”

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The latter was never hit, with GE stock topping out at $8.03. However, shares did temporarily push through the 200-day moving average.

GE’s rally from the start of this month has been fairly steady. Monday’s pullback gave investors a bounce off uptrend support (purple line), but Tuesday’s decline sent shares right through it.

Earnings always have the potential to be more volatile. As much as I’d like to see the $7 to $7.20 area hold as support — the highs from July, August and September — it’s a lot to expect should the reaction be bearish.

Instead, I would love to see the 50-day and 100-day moving averages act as support. Both measures served as resistance over the summer, and more recently, the 100-day moving average acted as support earlier this month.

In fact, it served as support over the course of five straight sessions. To see it hold again would mean GE could avoid a retest of $6 support. That’s the must-hold level should this stock nosedive on the numbers.

On the upside, the roadmap is pretty simple.

Bulls need to see shares first fill this week’s gap toward $7.65 and reclaim the 200-day moving average. Above the latter puts the October high in play at $8.03, followed by the June highs near $8.50.