As hard as it tries, Action Alerts PLUS holding General Electric (GE) cannot stay out of the news. It was only last week when I looked at the charts of GE and found some positives. Today, traders and investors are wringing their hands about the sum of the parts which is something I remember studying about for the series 86 exam many years ago. Which companies might GE spin off and what could they be worth to what buyers? Conjecture, conjecture. I want to look at the price action.
In this updated daily bar chart of GE, below, we can see that the price of GE rallied earlier this month and then declined in recent days essentially wiping out the prior gains. The hand wringing resumes. Yes, GE is back below the 50-day moving average line. Yes, GE is close to making a new low for the move down but let's not stop there when traders fear another 10% decline.
So far the On-Balance-Volume (OBV) line has not made a new low. Momentum has not made a new low either. Even if the price of GE makes a new low it is likely there will still be a bullish divergence between the price action and momentum since early November.
Candlestick charts most often show the quickest reversals. In this six-month daily candlestick chart, below, we can see two small windows (gaps) and red candles telling us that the close is below the opening. In the lower panel is the "fast stochastic" indicator which measures where in the range that prices close. This sensitive indicator is down in "oversold" territory. Being oversold is not a reason to buy as prices can get more oversold.
Bottom line: Investors worry at bottoms not tops so the grinding and mashing of teeth does not bother me. I have no idea what GE may be "worth" but the marketplace will figure it out. If GE makes a new low (i.e., below $17.25) I do not expect it to last long. That is not a recommendation to buy nor to add to long positions.
