Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

General Confusion



"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.

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos