[Chart Of The Week] Is General Electric Ready For Its Next Leg Higher?

JC Parets
December 16, 2016

One of the more impressive moves that we've seen in 2016 is in the Industrial space. While we came into the year near multi-year lows on a relative basis (XLI/SPY), we entered December hitting new all-time highs relative to the S&P500. You want to talk about a dramatic change in relative strength? This is something we take very seriously, and definitely not something to ignore. We also want to keep in mind is that this relative strength started well before any election, US or otherwise. This got going in January.

Today we're taking a look at the largest component in the Industrial sector: General Electric $GE, a stock that broke out earlier this year above a downtrend line from the all-time highs in 2000 and is still 30% below the 2007 highs. I think this is where we want to be looking:

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[hide_from visible_to="member"]Here is the weekly chart of $GE showing the breakout late last year followed by a 14 month consolidation. With prices making higher lows and higher highs above an upward sloping 200 week moving average, we know at the very least that this is not a downtrend:

GEw

So the question is, when/where do we buy it and how high can it go? Well, the easier one to answer is the latter: I think we get to the 2007 highs above $42. As far as entry points go, if you have a longer-term horizon, $28 is a solid level. I would not want to be long if we're below that. If you're a little more nimble and aggressive, $32 is a more tactical level I'll be watching:

GEd

To me, this is one we want to look to buy on weakness, not sell on strength. With a strong US Stock Market, Strong Industrial Sector on both an absolute and relative basis, the wind is at our backs in General Electric $GE. I like it.

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Tags: $XLI $GE $SPY

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