Here's Key General Electric Support After Underwhelming Profit Report

General Electric shares are roughly flat after the industrial group reported earnings. Here's how to trade the stock now.
Author:
Publish date:

General Electric  (GE) - Get Report stock is essentially flat on Wednesday after the Boston industrial group reported earnings.

With the S&P 500 up more than 3% and the Russell 2000 jumping over 5%, GE’s underperformance is a bit disappointing. 

On the flip side, the stock isn’t moving lower, and to some extent, that should be considered a victory in itself.

However, General Electric isn’t out of the woods yet. The bulls need to see the stock pick up momentum or risk breaking below support.

General Electric is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells GE? Learn more now.

Trading GE Stock

Daily chart of GE stock.

Daily chart of GE stock.

General Electric reported earnings of 5 cents per share, missing estimates by 2 cents.

Revenue of $20.52 billion dropped 25% from a year earlier but topped analysts’ expectations by almost $200 million.

Like Boeing  (BA) - Get Report and others, General Electric is not immune to the coronavirus impact. Also like Boeing, though, it’s encouraging to see that GE stock isn’t making new lows on the report, which by most accounts was underwhelming.

When a stock doesn’t go down on bad news, that should catch investors’ attention. Of course, General Electric might sell off later, but for now, no new low is good news.

The shares are fighting to break out over downtrend resistance (blue line), which overlaps with the 20-day moving average. Both of these marks have been resistance since the late-March rally.

If the stock can clear these two marks, a possible run to the $7.50 area opens up. There it will find the 23.6% retracement for the 2020 range. It may also run into the declining 50-day moving average, which should be a decent test of resistance.

Above those marks puts the 38.2% retracement near $8.75 in play.

I don’t know whether GE will clear the 20-day moving average and current resistance. Unless it does so quickly and by a substantial margin, we need to keep an eye on the downside.

Specifically, I’m watching the $6.20 level. That has been support throughout this month, and a move below it makes the stock vulnerable. In that case, it puts a test of the March low in play at $5.90.

Below that and GE stock could tumble into no man’s land. In short, we need to see how GE does with the 20-day on the upside and $6.20 on the downside.