The well-known American multinational conglomerate and digital industrial company, General Electric Company (NYSE: GE) seem to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Breakout: As you can see from the daily chart, General Electric was forming a falling wedge pattern during the past few weeks. This is marked as blue color lines. The stock has currently broken out of the falling wedge pattern after taking support at the bottom of the wedge. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
Daily Chart – GE
#2 Bullish MACD: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.
[hana-code-insert name=’adsense-article’ /] #3 Above MA: The stock is currently trading above the 50-day SMA, which implies that the bulls are currently in control.#4 Bullish Stochastic: The %K line is above the %D line in the stochastic, indicating bullishness.
#5 Bullish ADX and DI: The ADX indicator shows bullishness because (+DI) is greater than (-DI), ADX and (+DI) are above (-DI).
#6 Downtrend Broken: The weekly chart shows that the stock has currently broken out from a downtrend. This downtrend line is marked in purple color. This is a bullish sign.
Weekly Chart – GE
#7 RSI moving up: The RSI is moving up after reaching oversold levels, indicating strength.
#8 Bullish Stochastic: The stochastic had recently moved up from below 20. The %K line is currently above the %D line. All these indicate possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for the shares of GE if it closes above the 200-day SMA of around $14.15. This is to circumvent risk in case the present breakout in the charts is a dead cat bounce.
You may also purchase half the intended quantity of shares of GE if it corrects to the breakout level of the falling wedge pattern at around $12.85. However, make sure that you follow strict stop-loss.
TP: Our target prices are $22 and $30 in the next 4-6 months.
SL: To limit risk, place a stop loss below $12.50 (for entry near $14.15) and $11.10 (for entry near $12.85). Note that the stop loss is on a closing basis.
Our target potential upside is 55% to 133% in the next 4-6 months.
- Entry at $12.85: For a risk of $1.75, our first target reward is $9.15 and the second target reward is $17.15. This is a nearly 1:5 and 1:10 risk-reward trade.
- Entry at $14.15: For a risk of $1.65, our first target reward is $7.85 and the second target reward is $15.85. This is a nearly 1:5 and 1:10 risk-reward trade.
In other words, this trade offers 5x to 10x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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