General Electric Co. (GE) is giving investors a painful reminder in 2017 that a great company can be an awful stock.
Without a doubt, GE is an industrial powerhouse. The firm is involved in building everything from ultrasound machines to jet engines to refrigerators -- businesses that generated nearly $9 billion in combined revenue last year. And while recent results have fallen short of Wall Street's expectations, there's no arguing the fact that GE is a phenomenal, productive company.
Likewise, investors could be forgiven for thinking that has something to do with GE's stock trajectory in 2017.
Unfortunately for them, it doesn't.
GE has been a truly awful stock all year long, shedding more than 43% of its market value in the last 11 months, all while missing out on a near-20% broad market rally over that same timeframe.
There's no arguing that GE's share price hasn't been a train wreck this year, although there is plenty of debate about where GE becomes a buyable bargain again. With GE trading for practically half what it traded for this time last year, General Electric bulls are beginning to show themselves this December.
That's a big mistake.
To see why, we're turning to the chart for a technical look:
General Electric has been in selloff mode all year long and while the parabolic downtrend that's beaten down GE stock has taken a breather since mid-November, it's not a good thing.
In fact, more recently, GE has been forming a descending triangle pattern, a bearish price setup that triggers a new sell in GE if the $17.50 level gets violated. Simply put, as this stock has bounced between this descending triangle and the $17.50 price floor, shares have been getting squeezed closer and closer to a breakdown through $17.50.
If and when that happens, look out below.
Relative strength, the indicator down at the bottom of GE's chart, adds some extra evidence for a downside move in GE. Relative strength continues to make lower highs, signaling that GE is continuing to underperform the rest of the market, even now as shares seem to find some semblance of footing. That's good reason to steer clear of GE and own alternatives that are actually working in this environment.
To the folks who say GE is a great company, you'll get no argument from me. But GE's been a great company all year long, as its share price has cratered -- and shares are less than a dollar away from another leg lower as I write. Caveat emptor.
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