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Forecast for General Electric. Actual scenario and trading plan.

June 9, 2020

June 9, 2020

General Electric Company. Fundamental and technical analysis. Global cycles and medium-term forecastMikhail Hypov

**GE: Fundamental and technical analysis. Supercycles. Wave

structure. Key levels. Bill Williams’ trading system. Trading plan**

This article is devoted to one of the most interesting blue chips of the US stock market  - [General Electric Company][1].

History of GE

The history of General Electric Company starts in 1878 and is linked to legendary inventor Thomas Edison. It’s his Edison Lamp Company that became [General Electric Company][1] after a merger with Thomson-Houston Electric Company.  A lamp manufacturer at the beginning, the business developed fast and started producing a variety of products, from steam turbines and transformers to household appliances. The golden age of the company was the Second World War. The company’s earnings doubled on defence orders. [General Electric Company][1] supplied the US and the Allies’ armies with power-plant units for trade and military vessels. Over 50 types of military radars were developed. In 1942, the first jet aircraft was tested. Also, [General Electric][2] was one of the first companies that implemented a credit scheme for private consumers. That business scheme finally gave birth to one of the company’s biggest business activities - General Electric Credit Corporation with assets worth of $16 billion.  The company’s financial activities spread to insurance, real-estate and leasing.

Another golden age was the nineties. In 1994, [GE ][1] became the most valuable US company with the income of 70 billion USD.

![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][3]

In 1998, the company’s capitalization exceeded 100 billion USD for the first time. In 2000, a historical [GE][1] share price of 58.15 USD was reached, with the capitalization exceeding 500 billion USD. ![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][4]

Since [General Electric Company][1] was integrated into the global economy, crisis occurrences affected it too. The first slump occurred at the end of 2000 because of the dot-com crisis. Another collapse took place during the crisis of 2008. General Electric Credit Corporation, which used to yield over 50% of the company’s gross revenues, started to pull money in order to cover losses coming from high-risk trades. After the 2008 crisis the US government toughened the financial sector regulation, which put another load onto financial businesses.

![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][5]

The debt bubble was finally reduced from 708 to 539 billion USD, but the load was still high because of high debt service costs. As a result, in 2015 they decided to sell the company’s office buildings and some other properties worth 22 billion USD, as well as the GE Capital division. Those events initiated the biggest sell-off in the company’s history.

Fundamental analysis

![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][6]

After restructuring, the [company’s][1] equity dropped almost 5 times, from $136.93 to $30.30 billion.  Fundamentally, the situation has slightly improved but remains complicated.![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][7]

The available cash value stepped into positive territory in 2019. ![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][8]

The production margin level got steady at about 26-27%.![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][9]

At the same time, the company’s liabilities value is still enormous: $224 billion. Its debt/asset ratio got even worse.![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][10]

That value dropped from 0.57 to 0.35, which points to a decrease of debt load relative to assets.   Nonetheless, despite some alarming indicators, [General Electric Company ][1] remains a global corporation with a huge administrative resource. It makes stable profits from state defence orders and servicing petroleum, power supply and power generation systems. The company is the leader in these sectors and can develop further through a vast global network of offices.

Technical analysis

![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][11]

If we have a global look at GE’ s chart, we may suppose we are in the second wave of the super cycle that has been forming as a correction ABCDE. Such a formation is a rare thing for the second wave, but it may occur if the first wave is long. We see that the second wave went below 0.232 of the first wave’s height. It means an impulse’s flat development.  So, the third wave of the super cycle isn’t likely to update the historical peak, but there may be growth within the limits of the first wave’s projection.

![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][12]

The fourth wave won’t probably go below the middle of the third wave. The peak of top D is located in that area, at about 30 USD per share. It will be a support level if a fall occurs.   According to the Elliott wave structure, the third wave can’t be the shortest. Since the impulse is forming as flat, the fifth wave won’t probably go far from the first wave’s peak and the third wave’s supposed peak at 60 USD. ![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][13]

With a closer look, we see the signals described by Bill Williams. The MACD shows a clear bullish divergence in the chart above. The histogram is in the green zone. The MFI has already shown a squat candle. There’s no sense in checking Williams’ fractal before the end of August because at least two more candles must form after the local minimum. But we may speak of a good growth potential in the medium term even in the conditions of a general bearish trend. The minimum of wave © is located at around 5.51 USD. This is a strong support level for bulls, so a stop order should be placed below it when opening a long position.

Trading plan

![LiteForex: Forecast for General Electric. Actual scenario and trading plan.][14]

To sum up, I can’t say [General Electric Company][1] will go bankrupt soon. But I wouldn’t consider long positions otherwise than speculative operations in a bearish trend. Positions may be opened at the current level with the nearest target at around 11 USD. This level is very likely to be retested. If the market starts moving against bulls, averaging into the position at 7.8 and 6.6 USD would be wise. To my mind, the total volume of positions shouldn’t exceed 5% of the deposit because it’s still high-risk stocks in the current crisis circumstances. But if the governement supports businesses, I’m sure [General Electric Company][1] will be one of the first companies on the support list. So, the support levels look reliable fundamentally.   Remember that you can buy [GE][1] stock any time at LiteForex. If you still don’t trade, it’s time to start right now: the broker is raffling fabulous prizes to celebrate its [15th anniversary][15]. Everyone can win!

Good luck and profits, everyone!

Subscribe and keep in touch!

Yours,

Michael @Hypov

I’d like to remind you that all materials are provided for educational purposes only. They aren’t financial advice and don’t guarantee any profits. All trading decisions you make are your responsibility only.

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Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

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Price chart of GE in real time mode

![General Electric Company. Fundamental and technical analysis. Global cycles and medium-term forecast][18]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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