Shares of General Electric (GE - Get Report) were pummeled on Monday, closing lower by 5.2% to $9.49 after an analyst downgraded the stock from neutral to underweight and slashed their price target from $6 to $5.
But this isn't just any analyst. Key bear Stephen Tusa of JPMorgan, the one who's been right about the entire demise of GE's stock price thus far, issued the rating. He argued that investors are "overestimating the value of small positives" and that Wall Street is "significantly over projecting the bounce in FCF in the coming years."
General Electric's free cash flow has been one of Tusa's top critiques and was something the analyst drilled management on earlier in the year.
Tusa was the first analyst to issue a sell-equivalent rating on the stock and he maintained that rating as GE tumbled from north of $30 to the single digits. However, he raised his rating to a hold in December -- although he didn't raise his price target -- helping to pave the way for a stock price rally.
The stock's sliding now again following Tusa's move. Where can it go from here?
Trading GE Stock
The 200-day moving average is the first thing I notice when looking at the chart of GE stock. This mark has been resistance for the name, even when it was trading much better throughout the first quarter. However, shares are now gapping below that key post-earnings $9.50 level and are now below all of its major moving averages.
Even if GE stock were to recover that $9.50 level, it's still in the "prove it" camp. Meaning, it would need to push back through $9.86 and a few of its major moving averages before bulls could trust it on the long side.
Now the ~$8.70 to $9 area becomes key. This level failed as support in November and acted as resistance throughout January. Further, the former is the 61.8% retracement for the 2019 range. If anything, should GE stock find itself down here, this area should at least be good for a bounce.
Below this area and GE stock will be in no-man's land and need to reset before trying to figure out the next direction.With Tusa getting bearish again, it's certainly not helping sentiment. As RealMoney's Kevin Curran wrote Monday morning, "Tusa now expects that the company may be over-promising again and might not actually have the time it needs to fix the key metric ahead of a potential recession by 2021."