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How Much Damage Did Tusa's Downgrade Do To GE's Technical Picture?

Wayne Duggan

General Electric Company (NYSE: GE) tumbled more than 7 percent Monday after JPMorgan analyst Stephen Tusa downgraded the stock from Neutral to Underperform and lowered their price target to just $5. GE’s share price was off to a hot start to 2019 prior to the downgrade, but a look at the stock’s chart suggests Monday’s move may have done some significant technical damage.

After a brutal October and November of 2018, GE shares finally seemed to hit bottom when the stock bounced off of the $6.50 level twice in December. Since that time, the stock rallied as high as $11.20 in late February before settling last week at around the $10 level. Up until Monday, GE shares traded in an increasingly narrow pennant formation for roughly two months, trapped between the stock’s 50-day and 200-day simple moving averages.

Related Link: JPMorgan Downgrades GE, Says Wall Street 'Significantly Over Projecting' Cash Flow

Levels To Watch

Unfortunately, GE’s share price broke down Monday, falling below its 50-day SMA support line and out of the pennant formation. The good news for GE bulls is that the $9 support level that held in both February and March has so far held up on Monday as well. If the stock closes above $9, the technical damage may be contained. If it doesn’t, GE may not find support until the $8.50 level where it consolidated throughout most of January. Below $8.50, the next potential near-term support level is way down at the December lows around $6.50.

If $9 holds throughout the rest of the week, GE traders will shift their attention to a potential bounce. The first resistance level will likely be the 50-day SMA at around $9.86. Above that, the 200-day SMA at $10.32 will be the next potential resistance.

Long-Term Outlook

Despite big early 2019 gains off of December lows, there’s still not much to like about the stock’s longer-term technical picture. February highs of $11.28 were still well short of October highs of $13.21. GE shares consistently made lower peaks throughout 2018, a hallmark trait of a bearish trend.

For GE to make it to JPMorgan’s new $5 price target, it will have to take out that December $6.50 support at some point. If it does, traders can expect significant volume and a potential volatile near-term move to the downside.

GE's stock traded around $9.31 per share at time of publication.

Photo credit: Empoor, Wikimedia Commons

Latest Ratings for GE

Date Firm Action From To
Apr 2019 JP Morgan Downgrades Neutral Underweight
Mar 2019 Barclays Maintains Overweight Overweight
Feb 2019 RBC Capital Maintains Outperform Outperform

View More Analyst Ratings for GE
View the Latest Analyst Ratings

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