Shares of General Electric (GE) were raised to an outperform ("Buy") rating by a sell-side firm Tuesday. Let's check out the charts of this industrial powerhouse.
In this daily bar chart of GE, below, we can see that prices made a potential double bottom pattern. I use the word "potential" because the volume pattern is just not right in my opinion. Volume should expand in the direction of the trend. Notice how trading volume decreases from late October to early December as prices rallied. Prices went up which makes the longs happy but the power or volume behind the move up decreased - this is not what we want to see.
Sure the On-Balance-Volume (OBV) line moved up and broke above its August peak but its durability is questionable. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside for a take profit sell signal.
In this weekly Japanese candlestick chart of GE, below, we see a mixed picture. Prices rallied in October and November but the candles recently show us a top reversal in the past two weeks. Top reversals can mean a turn from up to sideways or they can represent a turn from up to down. Right now I don't know how this reversal will play out.
The 40-week moving average line has yet to bottom and the OBV line shows weakness in November. The MACD oscillator is above the zero line in buy territory but the two moving averages that comprise the indicator have begun to narrow.
In this daily Point and Figure chart of GE, below, we can see an upside price target of $112 but a trade at $83 or lower could weaken this picture.
In this weekly Point and Figure chart of GE, below, we can see a possible price target in the $122 area.
Bottom line strategy: You can call me "old school" in wanting to see volume confirm the price action but after 50 years of chart watching I don't plan to change. If we look at just price and ignore volume we are in an uptrend but the other trend that pays attention to volume tells me to avoid the long side of GE for now.
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