Dow Jones Industrial Average component General Electric Company (GE) sold off to a two-year low on Monday after the company announced the departure of key executives as part of a housecleaning and reorganizational initiative by new CEO John Flannery. The decline added to 2017 losses in excess of 25%, dropping the blue-chip conglomerate into the 30th and bottom slot in Dow component relative strength.

The company has spread itself too thinly in recent years, managing a mish-mosh of outperforming and underperforming units. The conglomerate is now slimming down by reorganizing the executive suite and dumping unprofitable businesses, but the process has not inspired investor interest, at least to this point. As a result, the persistent decline could continue in the coming months while the hefty 3.91% dividend slows but fails to stem a long-term shareholder exodus. (See also: GE – Being Cheap Doesn't Make It Attractive: JPM.)

GE Long-Term Chart (1995 – 2017)

The company listed on the original Dow Jones Industrial Average in 1896 and is the sole 21st century survivor. An uptrend that began in 1981 accelerated in 1995, generating the most prolific gains in the past 50 years while splitting three times into the August 2000 all-time high at $60.75. The stock sold off during the dotcom bear market, dropping to a five-year low at $21.40 in October 2002, and it bounced with U.S. equities into the middle of the decade.

The uptrend paused in the mid-$30s in 2005, giving way to a two-year consolidation pattern, ahead of a June 2007 breakout that stalled in September at the 50% bear market retracement level near $40. That marked the long-term top, ahead of a steep decline that accelerated during the 2008 economic collapse, nearly driving the company into bankruptcy. The stock bottomed out at $5.73 in March 2009 and turned higher into 2011, stalling at new resistance generated by the 2008 breakdown through the 2002 low. (For more, see: General Electric at Risk After Immelt Departure.)

That level stalled progress into a 2012 breakout that failed to attract healthy buying interest, yielding a slow-motion uptick that topped out at the .618 Fibonacci sell-off retracement level in the upper $20s in 2013. The stock then carved a broad rectangle with support in the low $20s, finally breaking out in October 2015 and rallying to a bull market high at $33.00 in July 2016. It has been all downhill since that time, with a May 2017 head and shoulders breakdown that has continued to post lower lows into the fourth quarter.

GE Short-Term Chart (2015 – 2017)

The stock broke the rectangle pattern during the August 2015 mini flash crash, posting a climactic low at $19.37 that could come into play in the next six to twelve months. The subsequent breakout unfolded in three buying waves into the July 2016 peak, while a lower high into December carved the right shoulder of a head and shoulders topping pattern with a neckline at $29. The 2017 head and shoulders breakdown has already exceeded the measured move target at $24. (See also: GE to Sell Industrial Unit to ABB for $2.6B.)

A Fibonacci grid stretched from the 2015 low to the 2016 high organizes 2017 price action, with the most recent selling wave breaking harmonic support at the .618 rally retracement level, which aligned with the head and shoulders measured move target. This bearish thrust now exposes the .786 retracement level at $22, marking the last support level ahead of a 100% round trip into the 2015 low in the upper teens.

On-balance volume (OBV) surged to an all-time high in December 2015, tested that level in July 2016 and entered an aggressive distribution wave that trapped loyal shareholders. The exodus is still under way as we head through the fourth quarter of 2017, while indicator positioning well above the prior lows offers a mixed blessing, pointing to loyal sponsorship that is also generating a big supply of losers who keep giving up and dumping positions. (For more, see: The Top 4 General Electric Shareholders.)

The Bottom Line

GE stock has dropped to a two-year low, testing the patience and pocketbooks of long-term shareholders. The stock is now extremely oversold and trading less than 1.5 points above strong support near $22.50, advising patience until that level gets broken. At that point, it makes perfect sense to lick your wounds and abandon ship. (For additional reading, check out: 5 Stocks That May Win Big From Tax Reform.)

<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>