Signs of Life for General Electric

General Electric (GE) is showing strong relative strength over the past month, and could be waking up from a long downward slumber. Let’s check out this surprising new development on the charts:

Price underwent a “Power Buy” swing, which took out the most recent two prior swing highs, showing signs of sudden and powerful life.

Momentum carved out a new high, suggesting that higher prices are yet to come. Odds would say “buy the first pullback” following this formation, especially if price can retrace to the solid support zone of the confluence of the 20 and 50 period daily moving averages. That development would set up a “super buy” opportunity (what I call the “Impulse Buy” Trade) similar to the “Super Short-Sell” trade in late December which occurred for the same reason (notice the triple combination of the major averages).

There also was a two-swing momentum divergence (shown) that hinted that a more powerful bull rally was ahead. The momentum divergence only projected prices to return sharply to the falling 50 period moving average, but buyers became more aggressive.

Also, volume is strongly confirming this move to new highs via a large increase in activity – also, notice the strong ‘drying up’ or reduction in volume on the down-days. This alone is cause for strong potential bullishness.

Let’s take a quick look at the weekly chart to see the larger structure:

Again, we have strong support via the $35 – $36 area where the moving averages converge. A weekly momentum divergence was also evident prior to the large momentum (price) move up. This appears to be more than a short-squeeze developing.

I focus almost strictly in technical analysis (price, volume, chart), but Kirk Lindstrom in a post at Seeking Alpha entitled “Insider Buying Makes the Case for GE” discusses some news related and fundamental analysis developments that you may wish to view to learn more about the recent developments. Lindstrom shows graphs of recent insider buying and notes a prior example of this phenomenon in Valence Technologies (VLNC).