"The mere attempt to examine my own confusion would consume volumes." - James Agee
This morning all eyes in the market are focused on General Electric (GE: NYSE). As Fokker chronicled, the company reported earnings inline with consensus with revenues slightly better than expected, but warned on the 3rd quarter and the remainder of the year. The stock initially traded down pre-open on the headlines, but is trading up as I post this thanks to a rosy tone on the conference call. Confused yet? Maybe the chart can help us decide whether this is bad good, good bad, regular bad bad, or regular good good. Below is the chart of GE through March 21 of this year.
This is a one-point (three-box reversal) point & figure chart of GE through March 21 of this year. The chart shows that GE had just broken a triple top (one column of Xs exceeded two previous columns of Xs) on March 21. How important was that buy signal? Consider the fact that it was the first buy signal for GE since April of 2001. That's not a typo. Yes, 2001.
Now, here is the current one-point chart of GE. As you can see the stock has reversed down into a column of Os, but this chart is still a long way from a sell signal (when a column of Os exceeds a previous column of Os.)
In the point & figure world it often helps to reduce the box size to speed up the chart. For example, in the chart above, GE would have to fall to 21 to give a sell signal, or in other words, it would have to virtually collapse from here. By speeding up the chart (reducing the box size) we can get a feel for where the stock would run into trouble long before 21.
Below is a half-point chart of GE. This chart shows a support area has formed in the 27.5 area. A move to 27 would break a triple bottom and give us a heads up that supply is gaining control of the stock.
Over the past year or so I've heard more than a few traders and money managers suggest that GE isn't the market bellwether it once was. I disagree. GE was among the leaders of the current rally that began in March. Therefore, I consider this stock a pretty important tell for the market. If GE falters, I expect the bullish path to become much more difficult than it's been since the end of March. Just something to keep an eye on.
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