Poor GE. Since its all-time high in 2000 at $60.50, the multinational conglomerate has fallen 75% to its present price at 14.95. Is it time to buy?
We can debate all the reasons the beaten-down Dow component could head higher, including three new directors, higher oil prices, the company’s growing aviation and healthcare businesses, and improved cash generation.
Those are all sensible expectations that could help carry GE higher. But will those expectations be realized? Only if buyers vote with their money.
Let’s turn to a price chart. When I target a bottom fishing a stock like GE for a possible purchase, I always flip to a long-term chart to see if the current price has prior support.
The monthly chart of GE shows the industrial does, indeed, have prior price support dating back to mid-year of 2010 and during the last quarter of 2011. With that confirmed, is the stock a good buy here?o
While it is still a falling knife (high-risk), the prior price support indicates buyers have stepped in at the $14 zone before. I will purchase a small position here, with a tight protective stop at $13.10. If GE can gain momentum over the next two to three weeks, and then make three consecutive closes above the 50-day moving average (now at $16.25) (on a daily chart—not shown), I may purchase additional shares.
For those who like to bottom-fish, GE may be a good purchase here. But as with all bottom-fishing trades, fundamental and technical research combined with strong-money management techniques boost the probability of a winning trade.