GE just ran up to its 40-day moving average -- a historically bearish signal for the stock
Shares of General Electric Company (NYSE:GE) will be ending the year deep in the red -- down nearly 58%, and set for their worst year on record. Now, the former Dow stock might be looking at even bigger losses in January. Specifically, GE shares just came within one standard deviation of their 40-day moving average -- a trendline that's meant trouble in the past. Now might be the time to abandon the security, if history is any indicator.
At last check, GE stock was down 0.7% to trade at $7.46. The equity has had a long run beneath its 40-day -- hitting a nearly 10-year low of $6.66 earlier this month. Over the past couple of years, there have been eight similar encounters with this moving average, after which GE went on to average a 10-day loss of nearly 5%, and was lower 75% of the time two weeks out, per data from Schaeffer's Senior Quantitative Analyst Rocky White. A month after signals, GE was down 9.1%, on average, and lower 87% of the time. A similar move would drag General Electric stock down to $6.78 a share -- only cents away from this month's low.
A round of analyst downgrades could push the stock even lower in 2019, with half calling GE a "buy" or better, and not a "sell" to be seen. In fact, the equity has been garnering fresh "buy" endorsements in December.
Plus, General Electric's Schaeffer's put/call open interest ratio (SOIR) of 0.43 ranks at the bottom of its annual range. This means short-term option players haven't been more call-heavy during the past 12 months. Should GE once again stall in the face of its 40-day moving average, an exodus of option bulls could translate into headwinds for the shares.