You guys long General Electric (GE) - Get General Electric Company Report ? Really? No way. Me too. Okay, gang, just what the heck are we going to do about that? It's never good when you think a company has made permanent positive changes based on a top-down revue of the entire firm that takes months. It cut the dividend. You understand. Management talk about cash flow. You understand. You sell puts at attractive strike prices. You're the bug. Still you understand. Even with an apparently underfunded pension plan, you understood.
Then, the firm announces a $6.2 billion after-tax fourth-quarter charge related to a legacy business that investors thought to be winding down. The finance unit will also have to pay $15 billion over seven years in order to replenish reserves. This news seemed to take the firm's leadership by surprise. One must ask: "Just what else don't they know?" I really can't complain. My cost basis is below $20, but regaining that level might be akin to a 25-mile forced march with a heavy pack and new boots, from where we stand now.
So let's look at the chart. For the purposes of relevance, I only charted back to just before General Electric's recent dividend cut. Relative Strength and money flow both scream for investors to run for the hills. So does the sudden turn for the worse on our moving average convergence divergence (MACD), though two of the three exponential moving averages (EMAs) remain in positive territory. That'll last for an hour or two. Don't even look at the Pitchfork, unless you're flat the name and looking for entry.
In that case, the trend is saying you have a month, and can get them below $15. Due to the fact that this slope was caused by news events, and one hopes that the news is out, I do not think that the trend is meaningful. Then again, I'm openly biased. The name tested the current level as support for the third time in two months on the closing bell. What does that mean?
Honestly, the December lows were the obvious work of tax selling, so I am not sure. I will tell you this: If the name does bounce from here, the spot does become something more than it was, at least to the algos. The Fibonacci levels tell us that on positive news, levels just above $20 do become realistic.
I understand that this stock is painful, especially if you counted on the name as an income provider. My thought is to hang on at least until spring, and see what the firm comes up with. In other words, let's see what the gang at Trian comes up with. Most importantly, if this name is causing you stress, then lighten the position at least to a point where your quality of life is not impacted by the daily fluctuation of market pricing. Onward.
(This is an excerpt from Stephen "Sarge" Guilfoyle's Morning Recon, which now appears exclusively on Real Money, our premium site for active traders. Click here for a free 14-day trial and receive Morning Recon every day, along with exclusive columns from Jim Cramer, James "RevShark" DePorre, technical analyst Bruce Kamich and more.)
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At the time of publication, Stephen Guilfoyle was long AAPL, GE, KEY, short GE calls, although positions may change at any time.