GE shares are entering a ‘death cross’

FAN Editor

As if things couldn’t get worse for General Electric.

Shares of the worst-performing Dow stock fell again on Tuesday and are now in danger of entering a technically perilous pattern that could spell more declines to come.

“In a world of new highs, we have General Electric hitting fresh new lows,” Rich Ross of Evercore ISI said Monday on CNBC’s “Trading Nation.” “The story goes from bad to worse when we look at the action here in the last two days,” he added.

The stock fell to its lowest level since August 2011 this week after both Morgan Stanley and UBS downgraded it on concerns over potential dividend cuts.

The industrial giant has been getting crushed this year — tanking nearly 30 percent and losing more than $84 billion in market cap, while the S&P 500 and Dow are up 15 and 18 percent, respectively. At its peak in August 2000, General Electric’s market cap was about $600 billion; however, as of the close Monday, its market cap had fallen below $200 billion, according to FactSet.

Looking at a short-term chart of GE, Ross pointed to the stock’s falling 50-day moving average as proof of “just how strong this downtrend is,” and the longer-term picture is even more gruesome.

“The picture is somewhat stunning here,” Ross said, pointing to what looks to be all the makings of a “death cross” on the chart of GE. This refers to when a stock’s long-term moving average crosses above its short-term moving average, setting a downward trend into motion. “Nobody likes comparisons to 2008, but you see the last time that the 50-week moving average crossed below the 200-week moving average, it set in motion a series of unfortunate events.”

GE stock plunged more than 80 percent from January 2008 through March 2009.

While that hasn’t quite occurred yet, “we’ve really opened up the door to a steeper decline, and the absence of support really suggests that General Electric is not a stock that we should buy on the way down, but we should wait for signs of stabilization and buy it on the way back up, if and when that does occur,” Ross said.

“In a world of strong trending bull markets and 52-week highs, we have a stock that’s trailing the Dow industrials by 55 percent. That’s not where I go to buy, that’s where I go to die,” he added.

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