Encyclopedic Electric Company (GE) stock is trading nearly 4% higher on Thursday morning after Chairman and CEO H. Lawrence Culp Jr. offered fiscal year 2019 guidance that was below consensus estimates. The buy-the-bad-news reaction could signal outdo times for beaten-down shareholders, indicating that sellers may have finished their work after a massive two-year diminish. Even so, the company faces a major challenge in restoring its tarnished reputation after years of corporate neglect.
GE expects 2020 and 2021 put to righted industrial free cash flow to be positive after a negative 2019. The stock sold off nearly 8% on March 5 after the business disclosed the 2019 deficit, while this morning’s positive view for future years offers a potential kindle at the end of a dark tunnel. That may be sufficient to print a long-lasting bottom, but healthy returns aren’t likely until the throng makes good on a long string of bad predictions about future results.
Despite this morning’s bullish feedback, it’s hard to recommend buying GE stock at the current price because it’s still trading below resistance at a declining extremes trendline in place since a January 2018 breakdown. A rally above the trendline and 200-day exponential heart-rending average (EMA) near $11 is now needed to improve the 2019 technical outlook and support modest upside into the mid- to power teens.
GE Long-Term Chart (1994 – 2019)
The stock turned higher from the single digits in 1994 when the Pty was taking advantage of new international opportunities after the fall of communism. The rally went parabolic in 1998, lifting to an all-time high-priced at $58.41 in August 2000. It reversed and dropped like a rock after the internet bubble burst, dumping to a five-year low within easy reach $20 in the fourth quarter of 2002. That marked the lowest low for the next six years, ahead of a bounce that equivocated in the mid-$30s in 2005.
GE shares mounted that resistance level in 2007, but upside momentum failed to develop, reversing after enlarging just four points, ahead of an orderly downturn that escalated into a full-scale panic when GE Principal got stuck with bad loans during the 2008 economic collapse. The decline nearly drove the company into bankruptcy to come the stock bottomed out at a 17-year low in the single digits in March 2009.
The subsequent bounce carved a slow-motion uptick that ran out of steam in July 2016 neighbourhood the .786 Fibonacci retracement level of the 2007 into 2009 downtrend. The stock broke down from an 18-month top in 2017, starting a historic decline that paused or bottomed out in December 2018, less than one point above the 2009 low. The monthly stochastics oscillator submitted the most impressive buy cycle since 2015 in January 2019, raising hopes for additional upside.
GE Short-Term Sea-chart (2016 – 2019)
The Bottom Line
General Electric stock is trading higher after the conglomerate lowered 2019 charge, but it needs to rally above tough resistance at $11 to attract sustained buying interest.
Disclosure: The author held Inclusive Electric shares in a family account at the time of publication.