Here's Why General Electric Is A Short

JC Parets
April 5, 2016

I think there is a nice shorting opportunity in General Electric that we can take advantage of this month. There's nothing better than making money when a stock is falling. The reason is because stocks tend to move a lot faster on the way down, than on their way up. It's the old, Escalator Up & Elevator Down behavior.

The way I see it, $GE hit our upside target of $31 last November, so there's been no reason to own it. This target is based on the 161.8% Fibonacci extension of the massive consolidation throughout 2013-2015. Here is a weekly chart showing prices getting up there, pulling back in December and January, and now more recently rallying back up towards that $31 level and beyond:

4-5-2016 3-17-55 PM ge w

With the recent highs last week, momentum didn't even reach overbought conditions. In fact, it put in a 3rd straight lower high while prices made higher highs. That is a nasty bearish divergence just waiting to be confirmed by price falling back below $31.

Next, here is a daily chart so we can take a closer look at exactly what's happening here. The trade is simple: we only want to be short $GE if prices are below the December highs. This confirms a failed breakout and puts prices below the uptrend line(s) from the February lows:

4-5-2016 3-17-55 PM ge d

We want to be covering shorts down near those February lows near $27.50 and then reevaluating once again at that point.

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Tags: $GE

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