The dream of the CEO of General Electric Company (NYSE: GE) Mr. Jeff Immelt to push the company’s stock above the $30 per share came to reality during the previous year, as market players responded positively to GE’s move to divest out of its Capital segment. This move resulted in lower exposure to the financial markets. Yet, at the present stock price levels of the US-based conglomerate, the technical analysis of GE’s chart displays that the short term bullish trend line support has been violated. Having said that, it is likely that the market will plunge towards the price of $28.94 per share.
As of 9:46 AM GMT -4 on April 7, the GE stock is changing hands at $30.58, down by 1.04 percent or 0.32. The highest the company’s shares have rallied to in the previous year has been at $32.05 per share, which was attained last month.
The stock price action of the corporation has violated the short-term support line. Moreover, the Sell signal triggered on daily momentum readings. We believe that investors should anticipate near term selling pressure near the $28.94 level, where the stock would complete the 23.6 percent Fibonacci retracement of $18.90 to $32.05 rise.
In order to negate such weakness and resume the positive trend, a closing break above the $32.05 level is necessary. Market players are recommended to minimize exposure on strength with risk found above $32.05.
During the past 2 years, the US-based conglomerate has been divesting out of the Capital division. Instead, General Electric puts more focus on the company’s Industrials segment. Yet, some in the market is still doubtful of the outlook of GE.
The root of market players’ skepticism can be found in the heightened focus that the firm has placed on the Oil & Gas division of General Electric. The Energy unit has not been able to post growth because of the downturn in the oil market. During the fiscal year 2015, the Oil & Gas segment contributed about 13.8 percent of the total revenues obtained within the given period. The revenues from the division was at $16.45 billion in 2015, having declined by 13.8 percent on a year-over-year basis.
Data from Baker Hughes reflects that there were nearly 2,000 rigs operating in the United States during the year 2011. As of April 1, this US rigs come in at 450. With the stabilization of the oil markets being contingent on a drop in oil inventories, especially from the United States, the demand for the offerings of the Oil & Gas division is anticipated to plunge. This of course poses a significant risk for General Electric.
According to Bernstein, the GE stock is trading at a premium and the price movement would be in line from here on out. The analysts at Bernstein also pointed out that the shares of the conglomerate were changing hands at a close to 20 times premium multiple. With this, the firm has revised its rating for General Electric and downgraded it from Outperform to Market-Perform.
Several analysts maintain their bullish stance on the GE stock, forecasting an upside potential of 9.49 percent in the next 12 months. Out of the 18 analysts polled by Bloomberg, 11 rated it a Buy, while 7 gave it a Sell rating. Moreover, the consensus price target for the company’s stock comes in at $33.92.