(The Street) – Shares of General Electric (GE) have been volatile lately but bulls are getting back in control.
On Friday, Goldman Sachs analysts resumed their coverage with a buy rating and a $10 price target.
The upgrade comes just a few days after it was reported that GE received a Wells Notice amid an insurance accounting probe.
Wells Notice, accounting probe – not terms you like to hear about a stock when making the bull case. But Goldman Sachs said GE is becoming a “leaner, structurally more productive company with better capital discipline.”
That may be true, although fundamentally, there are still plenty of concerns. However, I am encouraged by the way the stock has been trading the last few days despite what should be perceived as negative news.
You know what they say: Nothing is more bullish then when a stock rallies on bad news. Let’s look at the charts.
Last month, GE stock was putting together another solid rally. I was looking to see if shares could rally up to the 23.6% retracement near $7.30. On the downside though, I said the stock needed to hold the 20-day and 50-day moving averages as support.
That didn’t happen.
On the plus side, $6 again held as support as GE continued to carve out a nice low. On Thursday, shares burst higher once again, gaining 5.4% and clearing the 20-day and 50-day moving averages and downtrend resistance (blue line).
GE is again petering out near $7 though, leaving traders in a tough (and exhausted) spot.
From here, let’s see if shares can get above $7 and rotate over the September high at $7.17. Above that puts the 23.6% retracement in play at $7.31. If it can clear these areas, it could open the door to the 200-day moving average and the $8.50 mark.
On the downside, bulls need to see GE stock find support in the $6.40 to $6.50 area. A reset back to this area would actually be a decent opportunity for those looking to get long with a low risk/reward.
A break of this area would put $6 support back in play. As sturdy as this level has been, we don’t want to see it tested too many times.