The pandemic may deal a death blow to the General Electric Company (GE), which has struggled for years to reform a bloated organization and shed high debt. The company missed first quarter of 2020, the earnings estimates by a large margin, in April, reporting a 24.8% decline of a year of income, with all the divisions, with the exception of the health care losses. Business aviation is taking the biggest hit so far, the forecast of a 25% permanent reduction of the workforce due to the “depth of the contraction” of commercial aviation.
GE has removed 2020 orientation on April 9, and reiterated a gloomy prospect for the benefit of the presentation, expecting a drop in second-quarter financial results. The free cash flow is also declining rapidly, potentially forcing the company to seek a takeover by a liquid purporting or add to the debt through the credit markets. Neither perspective is a done deal, because well-run companies don’t need another noose around the neck, and the banks are reluctant to lend money.
GE stock has been crushed since the trim in the low $30s in 2016, to the abandonment of more than 80% of the lowest since the economic collapse of 2008, when the company narrowly escaped bankruptcy after the collapse of the GE Capital division. It has been even more rocky ride in the last 20 years, with a sequence of lower highs while the rest of the market of the universe enjoyed two secular bull markets.
Technically speaking, the time may be because GE stock is now trading at just 70 cents above the lows of 2009, which marks the line of demarcation between the large downtrend and the potential death spiral. Unfortunately, long-term price and volume, the models are implemented in the wrong direction, with the 2020 downdraft awareness of the odds of a major power outage that falls on the stock the lowest since 1990.
GE Long-Term Chart (1990 – 2020)
The company prospered after the fall of communism in the 1980s, the entry of a historic upward trend, which has published four divisions of shares in August 2000 all-time high of $58.41. He turned sharply lower when the bursting of the internet bubble, the loss of more than half of its value in the October 2002 low. A weak upward trend during the mid-decade bull market has seen a modest increase, rising to a lower high just above $40 in 2007.
A fall in 2008 accelerated in a panic, the abandonment of the goods to more than 85% in the 2009 low at $5.51. Keep that price in mind because the 2020 decline is now testing the support level for the second time in 18 months. A resumption of the wave in the new decade has reached the resistance to the 2002 low in 2011, to deny the progress made up to a 2013 breakout generated a little bit of the upward trend, which has displayed the second lowest of the top 16 in 2016.
2017 lower trend ignored several hollow calls, finally entering into a process of climate in October 2008 and the applicant to the vertical before finding support just above the lows of 2009. A two-legged bounce ran out of steam in February 2020, the sculpture of the third to lower two-decades, before a sale of the wave corresponding to 2018 intensity. The decrease of the remains of 2018 low in March and has rebounded, but the buying pressure dried a week later, which gives a slow motion decline that has now reached within a few cents in the first quarter low.
GE Short-Term Outlook
The price action of more than 11 years has made a huge inverse cup and handle break in the trend is going to trigger another round of sell signals if the stock is trading at $5.51. The balance volume (OBV), the accumulation-distribution indicator of prediction of this sad event, because it has already broken a similar model, the dumping at the lowest in 50 years. There may be no light from the end of the end of the tunnel if the GE is broken down, increasing the chances that the company will be forced to issue a reverse stock split and seek strategic alternatives.
The Bottom Line
General Electric stock is to test the 11 years of support for the second time in the last two years, the threat of a major breakdown that could portend the company’s demise.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.