General Electric Company Stock May 'See The Lights Go Out': A Technical Analysis
General Electric Company (NYSE: GE) shares are back under pressure as the market has gone from a "straight-up" trajectory to a more volatile consolidation phase.
In general, the stock was lagging to begin with, so difficult market conditions have only weighed GE down more. So, how tough can things get for the stock in the short-term?
What The Bulls See...
• An attractive 3.5 percent dividend yield.
• A current ratio of 2.66, despite the company's long-term debt load.
• Cheap valuation metrics, including a price-to-book ratio of 1.95, a price-to-sales of 1.79 and positive levered free cash flow of $17.33 billion annually.
• A stock that has not yet fully participated in the market's upside, which -- theoretically -- makes it a great “catch up” candidate.
What The Bears See...
• A heavily levered company that needs friendly credit markets for its operations to run smoothly.
• About $378 billion in debt versus only $10 billion in cash reserves.
• A debt-to-equity ratio of 270 percent.
• Anemic revenue and earnings growth projections of 1.2 percent and 8.3 percent, respectively.
The Technical Take
Technicians note that GE stock looks like it is in the midst of an “abc” downside correction with targets down at around $23.67.
That level represents both the Fibonacci projection for the “c” leg of the “abc” formation as well as the support provided by the broken downtrend line.
From there, the stock should, in theory, make a nice move to the upside. If $23.67 is violated on the downside on a closing basis, however, that bullish scenario will be negated.
General Electric may be in for more difficult trading in the short-term as this “abc” pattern plays out.
On the other hand, once the downside target at $23.67 is tested, bulls may have a shot at seeing some upside action for a change.
Disclosure: At the time of this writing, the author had no position in the equities mentioned in this report.
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