Here Is When General Electric May Be a Buy - TheStreet

Here Is When General Electric May Be a Buy

General Electric is rising Friday, with the stock hitting its highest level since September. Here's how to trade the stock now.
Author:
Publish date:

Shares of General Electric  (GE) - Get Report have been volatile lately but bulls are getting back in control.

On Friday, Goldman Sachs analysts resumed their coverage with a buy rating and a $10 price target.

The upgrade comes just a few days after it was reported that GE received a Wells Notice amid an insurance accounting probe.

Wells Notice, accounting probe - not terms you like to hear about a stock when making the bull case. But Goldman Sachs said GE is becoming a “leaner, structurally more productive company with better capital discipline.”

That may be true, although fundamentally, there are still plenty of concerns. However, I am encouraged by the way the stock has been trading the last few days despite what should be perceived as negative news.

You know what they say: Nothing is more bullish then when a stock rallies on bad news. Let’s look at the charts.

Trading General Electric

Daily chart of GE stock.

Daily chart of GE stock.

Last month, GE stock was putting together another solid rally. I was looking to see if shares could rally up to the 23.6% retracement near $7.30. On the downside though, I said the stock needed to hold the 20-day and 50-day moving averages as support.

That didn’t happen.

On the plus side, $6 again held as support as GE continued to carve out a nice low. On Thursday, shares burst higher once again, gaining 5.4% and clearing the 20-day and 50-day moving averages and downtrend resistance (blue line).

GE is again petering out near $7 though, leaving traders in a tough (and exhausted) spot.

From here, let’s see if shares can get above $7 and rotate over the September high at $7.17. Above that puts the 23.6% retracement in play at $7.31. If it can clear these areas, it could open the door to the 200-day moving average and the $8.50 mark.

On the downside, bulls need to see GE stock find support in the $6.40 to $6.50 area. A reset back to this area would actually be a decent opportunity for those looking to get long with a low risk/reward.

A break of this area would put $6 support back in play. As sturdy as this level has been, we don’t want to see it tested too many times.