GE Should Bring Good Things to Life This Summer

 | Jun 01, 2017 | 12:00 PM EDT
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After shares of General Electric (GE) peaked last July near $33, the heat of its monster rally off the 2009 lows moved from boiling to simmer, as the current probing into the $27s illustrates. However, the next few months could include a return to the front burner of investors' focus, as the corrective pattern appears over, or nearly so.

This is the big picture of GE's price behavior of the past 25 years. While we can't tell if the entire rise off the 2009 low is over, the next few weeks to months could be the ideal time to exit long exposure, before bearishness potentially becomes more assertive than the last year's growling proved to be. Therefore, using any rise toward $32 +/-$2 to reduce exposure, or exit completely, is becoming the optimal plan to avoid the next decline into the green box of support.

Why the bounce higher? Not shown in this monthly bar chart, the shorter term degree of trend, using daily bars, finds GE shares very oversold in the $27 +/-$1 zone, with stochastics crossing up out of oversold extremes. This tends to put the path of least resistance for the coming 13 to 21 days into the upward direction.

More importantly, the current test of the $27s is testing the lower-three standard deviation band, which controls 99.7% of normality, which is often followed by a return of price to the 200-day moving average (now at $30), with potential to reach the upper statistically-overbought extremes of the two- and three-standard deviation bands ($32.25 and $33.50, respectively).

However, this rise must happen in the next few weeks to months, as the monthly stochastics shown on the chart above continue to point lower for the coming five to eight months. This would imply GE's renewing price weakness into later this year, potentially into the $18 +/-$3 zone.

Members of our DSE Alerts service were informed earlier today that any close under $27 should be used as a sell-stop level to immediately lighten long exposure, while closing under $25 should be the line in the sand for massive action to avoid serious position damage. Until these triggers are pulled, any stretch into the $32 +/-$2 zone should be considered an important window of opportunity to exit longs and enter shorts.

The next few weeks of rising prices is a critical action window. Once it closes again, there won't be much fresh air for selling near 30 for what could become years.

For updates on this analysis, as well as other trading opportunities, try Ken Goldberg's DSE Alerts service for free for a couple of weeks, or contact him at support@dsetrading.com

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