General Electric Co. (GE) shares fell to fresh 52-week lows after Deutsche Bank downgraded the stock to Sell from Hold and reduced their price target to $24.00 per share. The analyst cited weak earnings quality as a reason for the downgrade, as the gap between non-cash and cash earnings widens. In particular, unfunded pension obligations have weighed on earnings in recent quarters and could become a growing problem in the future.

The news also comes after Boeing (BA) halted 737 MAX test flights because of engine problems – engines that are supplied in a joint venture between GE and France’s Safran. The partners have since identified the problem and flights have resumed, but the company’s stock has remained depressed following the news.

From a technical perspective, the stock broke down from S1 support at $28.43 and briefly touched its S2 support at $27.88 before regaining some ground by the end of the day. Traders should watch for a move back above S1 support toward its lower trend line at $29.25 or a move below its S2 support and prior lows last November at around $27.75. If traders are to believe the analyst’s price target, the stock could see significant downside ahead.

Technical indicators suggest that there may be some consolidation – with the relative strength index (RSI) trading at 28.86 – but the moving average convergence-divergence (MACD) experienced a bearish crossover in late-April and has been trending lower ever since. The latter indicator points to more potential downside as the trend remains largely lower.

Charts courtesy of StockCharts.com. Author holds no position in the stock(s) mentioned except through passively-managed index funds.

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