General Electric Company (GE) shares jumped more than 9% in Tuesday's pre-market after the conglomerate reported first quarter earnings per share (EPS) of $0.14, beating expectations by $0.05, and met modest revenue estimates. A 1.8% decline in year-over-year revenue points to continued headwinds after a three-year downtrend that hit a nine-year low in December 2018. The company also reaffirmed fiscal year 2019 guidance, expecting to book EPS of $0.50 to $0.60.
Price action stalled near the 200-day exponential moving average (EMA) at $10.70 ahead of the opening bell, setting the stage for a high-volume session that should reveal current demand for the beaten-down stock. It reversed after piercing that level during a February bounce to $11.30 and also failed March and April breakout attempts. Look for GE stock to gain ground more forcefully after a successful breakout, rapidly completing a round trip into the October 2018 high at $13.18.
GE Long-Term Chart (1994 – 2019)
A modest uptrend attracted a strong momentum bid after the stock split two-for-one in May 1994, generating a powerful trend advance that persisted into August 2000's all-time high at $58.41. It carved a head and shoulders topping pattern and broke down after the Sept. 11 attacks in 2001, entering a major downtrend that finally ended at a five-year low near $20 in October 2002.
The subsequent recovery wave posted decent gains into December 2004, when buying pressure fizzled out in the mid-$30s. Price action then eased into a narrow range, trading sideways into a June 2007 breakout that lost steam just five points above new support in October. The subsequent downturn intensified in the second half of 2008, with the poorly performing GE Capital division battered by the economic collapse.
The stock posted a 17-year low in March 2009 and turned higher, carving a strong bounce that stalled just above $20 in 2011. It added to gains at a modest pace into the 2016 high at $31.73 and broke down from a three-year topping pattern one year later, entering a brutal decline that may have ended 89 cents above the bear market low in December 2018. However, the first quarter bounce has tested the patience of beaten-down shareholders, stalling in February after nearly doubling in price.
The monthly stochastics oscillator entered a buy cycle in December 2018 after posting a deeply oversold technical reading and still hasn't crossed into the overbought zone. This positioning could generate a modest second quarter tailwind that supports additional gains into the mid-teens. Even so, the 2019 bounce is barely visible on this monthly chart, illustrating GE's long and dangerous road back to profitability.
GE Short-Term Chart (2016 – 2019)
A Fibonacci grid stretched across the 2016 into 2018 downtrend highlights extensive technical damage, with the .382 sell-off retracement level nearly 60% above Tuesday morning's opening print. However, it's impossible to confirm the accuracy of these harmonic parameters because first quarter price action has failed to confirm a new uptrend by ending the string of lower highs in place since December 2016.
The on-balance volume (OBV) accumulation-distribution indicator compounds these missing buy signals, holding relatively close to the deep 2018 low while failing to reach the October 2018 peak or mounting the red trendline of lower highs since 2017. Given these bearish volume metrics, the stock is still exposed to renewed downside that tests and possibly breaks the 2009 and 2018 lows.
The first sign of better times will come when the stock finally mounts 200-day EMA resistance, which it hasn't held for more than a few hours since April 2017. The moving average is still pointed lower despite several months of higher prices, adding to an already formidable barrier. The second sign of improvement will require continued upside into the October 2018 low above $13, finally ending the long string of lower highs.
The Bottom Line
General Electric stock is trading at a two-month high after the company posted stronger-than-expected first quarter results, but it still hasn’t confirmed a new uptrend after trading lower in 2016, 2017 and 2018.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.