General Electric (GE) reported earnings on October 20, 2017; its share price has been in a steady downtrend since. Let's review some longer-term charts to see where support areas may be for this Halloween special GE stock chart review.
My previous full-length update for General Electric can be quickly accessed here.
In that update, I talked about 2 support areas below its current price where GE would find support from its Head & Shoulders chart pattern that developed. Those price levels were the $28 and $24 price levels. Neither support area has held. It's time to look at some updated chart activity and re-analyze the charts.
General Electric (GE)
This first chart for General Electric (GE) is a 10 year monthly candlestick chart. When shorter-term support areas do not hold, it means you typically need to increase the scope of what you are looking at. Go bigger picture. If a correction is larger or longer than you anticipated, the best way to re-analyze a chart is to look at a bigger picture. This 10 year chart captures GE's entire uptrend, which is what it is probably in the process of correcting right now.
With a MACD Histogram that reflects increasing selling momentum along with the fact that there has been increasing selling volume indicates a probable push towards the bottom of the support area. The support area is identified by the gray shaded box. A 61.8% Retracement, a very common retracement percentage for uptrends, falls near the bottom of the support area.
GE's share price may find some temporary support around the 50% Retracement Line, but based on the other bearish factors noted above, that support will most likely be temporary. For an uptrend that lasted 8 years, the ensuing downtrend won't be over that quickly...
However, if you have every wanted an opportunity to purchase shares for GE for the long-term, sometime in the next 3-9 months could be the best and cheapest opportunity of your lifetime. It will be important to set an alert with your trading platform with a price target equal to the 61.8% Retracement Line. The trade will need to be re-analyzed at that time.
Since this is a longer-term trade set-up, one aspect can be monitored by you at home. It will be important to see 2 consecutive months of decreasing selling momentum on the MACD Histogram chart indicator. Once that occurs, it is possible that a bottom has formed is is forming. That is the opportunity to purchase your long-term shares.
GE - Dividend Cut?
One other bearish item to consider. One of the reasons for the sell-off after earnings was due to the talks of a possible dividend cut. Consider the status of these talks once GE is in a buying range. If the dividend cut is still on the table as a possibility, maybe the $16 price level isn't so attractive after all.
GE - Point & Figure
Let's review the Point & Figure price targets for the 2 methods - High/Low and Close.
High/Low Point & Figure - $11 Bearish Price Objective
Closing Point & Figure - $11 Bearish Price Objective
Both the High/Low and the Closing P&F Charts have identical price targets. Both of these are even lower than the $16 support area I was looking for.
GE - Moving Averages
There is one thing to consider for long-term investors before making a purchase to help remove the risk of a continued downtrend. If you do not want to try and time the bottom, let General Electric's (GE) share price develop a Golden Cross pattern and then purchase its next pullback. The development of a new Golden Cross pattern typically signals a change frombearish to bullish behavior.
That trade set-up is one I've mentioned several times before - purchasing shares on the 1st pullback to the 200 Day moving average after the development of a Golden Cross pattern.
General Electric (GE) Summary
Consider long-term shares around the $16 area if talks of a dividend cut diminish. If the dividend cut remains a possibility as GE's share price approaches the $16 downside target, the lack of a dividend has to be considered.
It will be important to stay on top of the dividend cut talks if GE is a long-term stock for you. Because if GE is a stock for you and the dividend cut talks do diminish, the $16 price area could be the buying area of your lifetime. But if the dividend cut talks remain, maybe the $11 bearish price objectives calculated by the Point & Figure charts come to fruition.
If you are one of the longer-term investors considering some General Electric shares, then drop a request for an update at any time....