Shares of General Electric Company (GE) fell nearly 4% after JPMorgan analysts reiterated their Underweight rating and cut their price target to $22.00 per share, which represents a further 16.4% decline from Thursday's closing price. The analysts noted that GE's narrative remains "open and undefined" while suggesting that reduced earnings outlook and shrinking growth will not be easily solved with restructuring.
Incoming CEO John Flannery arrives at a tough time for the conglomerate, which has been struggling to keep its businesses growing at an acceptable pace. While restructuring could remove billions in costs, the company is likely to experience top- and bottom-line headwinds over the coming quarters before reaping many of the benefits. However, many investors still believe that the company has a lot of high-quality assets that could lead to great opportunities. (See also: General Electric at Risk After Immelt Departure.)
From a technical standpoint, the stock broke down from prior lows at around $27.00 to lower trendline and S1 support at $26.13. The relative strength index (RSI) moved further into oversold levels at 32.27, but the moving average convergence divergence (MACD) remains bearish following its crossover in late June. The fundamental picture is also likely to remain decidedly bearish until the company provides further clarity regarding its plans.
Traders should watch for a breakdown from S1 support to S2 support at $24.24 or a rebound to prior lows at $27.00 before the stock attempts a breakout higher. While some consolidation or a relief rally may occur, traders may want to maintain a bearish bias given the fundamental issues highlighted in JPMorgan's analyst report. Any new information from management, however, could lead to a rebound if it is well received by investors. (For more, see: GE Completes Merger of Oil & Gas Unit With Baker Hughes.)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.