Shares of General Electric (GE) - Get General Electric Company Report had been on fire since bottoming at $6.66 in mid-December. After almost doubling off those lows, though, GE stock is running into trouble, technically speaking.
GE stock fell about 5% on Tuesday and closed lower by 7.98% on Wednesday to $9.11 after Stephen Tusa of JPMorgan, a long-term bear on the name, reiterated his "generous" $6 price target and neutral rating on the stock. This came after General Electric CEO Larry Culp said the company's industrial free cash flow would be negative for the year.
As we said, the charts are running into some technical trouble now as a result. What does that mean?
Trading General Electric Stock
With Tuesday's fall, General Electric stock lost the 21-day moving average, although that's not shown on the chart. Instead, we've chosen to highlight the 50-day, 100-day and 200-day moving averages.
One can clearly see where GE lost its fight with the 200-day moving average, which is not all that surprising given how far it's rallied from the lows and that it was bumping into a prior support level near $10.75. However, I wanted to see if GE could hold onto this $9.50 level after Tuesday's decline, an important post-earnings support mark that kept General Electric stock afloat for most of February.
Short of a big intraday rally on Wednesday, GE stock is likely going to close below that level in the current session. That puts the $8.75 to $9 level on alert. With the 50-day and 100-day moving averages within a nickel of $8.95, it would be encouraging for the stock to hold this level. More so, this $8.75 area was resistance in January and it would be bullish to see it now hold as support.
On the flip side, GE stock will be flashing some warning signs should it lose these levels. It will add momentum to Tusa's call for $6, even though that would require General Electric stock to break below its December lows.
It will likely take more than a few days or weeks to unravel GE's multi-month rally, but there's no denying that this week's action and commentary dealt a serious blow to the stock's sentiment. Tusa also said that, "Unlike prior episodes that were based on next year, this seems to stretch into 2021, a whole new level. As long as this sentiment prevails, we don't think the stock can bottom."
As RealMoney's Kevin Curran wrote this morning: "For now, the lack of clarity on the outlook, the lengthened timeline for recovery, and the expectation of greater pain in the industrial segment are leaving few market participants so optimistic."
See if support holds. Should it fail, GE stock could have a ways to go before findings its footing.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.