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Emerging Pattern
Pullback
A stock may pull back after a breakout, often to the 50-day line. A rebound from the first or second visit to the 50-day can be a buying opportunity, especially for existing holders to add some shares.
General Electric (GE) is tracking an aerospace industry rebound, with a round of new orders for industry leaders like Boeing (BA) underscoring an improving outlook. GE stock was poised in a follow-on buy situation on Wednesday.
General Electric operates four main business units. The Aviation unit designs and manufactures aircraft engines and various systems for commercial and military applications. Healthcare manufactures various patient monitoring and diagnostic equipment.
Renewables offers a broad range of generation, transmission and storage components and systems. GE’s Power segment focuses on power generation technologies including gas turbines, steam generation and nuclear power.
In 2021, aviation was almost 29% of the company’s $74.2 billion in overall revenue. Health care was almost 74%. Renewable energy was 21% and power was almost 23%.
In July, General Electric announced it would divide into three publicly traded companies in 2023-24: GE Aviation, GE HealthCare and GE Vernova, which will combine its power and renewable energy businesses. The company said it tentatively plans to execute the split early in 2023.
It will be just the latest permutation of the 130-year-old company, which was originally formed from companies owned by Thomas Edison and consolidated into the Edison General Electric Company.
GE Stock A Buy? General Electric Rallies As Earnings Show Aviation In “Upswing”
GE broke a five-quarter string of earnings advances in Q3, reporting a 39% drop in earnings and a 2.8% rise in revenue. The earnings number undercut analysts’ targets, while revenue was better than expected.
For the full year, GE sees EPS of $2.40-$2.80, down from its initial guidance of $2.80-$3.50. Analysts polled by FactSet provide a consensus estimate of $2.56 for the year vs. $1.78 in 2021 and just 14 cents in 2020.
A two-week pullback sent GE stock to a quick touch down on its 10-week moving average on Monday. The rebound from that line presents a follow-on buy opportunity.
A rebound from support is not a good place to open a new position. But the rebound may help investors who bought during the stock’s early November breakout from a bottoming base. GE rose not quite 9% from that breakout, then lost its breakout verve.
A move above Tuesday’s high of 84.90 would offer a specific trigger, topping the 21-day line and breaking a short trendline while still being close to the 10-week line.
Shares pulled back narrowly below the buy point Tuesday, technically triggering a sell rule, but not the automatic stop-loss rule.
It’s always best to pyramid into a stock on a rebound. In this case, there is a possibility GE stock could consolidate and form a base-on-base pattern.
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Notice: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice.
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