Money Markets

Reading the Tea Leaves for General Electric Company (GE)

The recent development in General Electric Company (NYSE:GE) stock have made investors to juggle around with their spending. Analysts often use price and volume data to predict future stock performance. In the case of GE, the chart has some interesting things to say about where the stock might be headed.

How has the stock performed recently?

General Electric Company (NYSE:GE) has been trading in a bearish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of GE has decreased -21.00%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 656%. After the latest session, which saw the stock close at a price of $14.82, GE sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that GE may be headed in the future. Fortunately, there is way to use the speed and magnitude of these price changes to predict future performance, thanks to what are known as momentum indicators. As momentum slows, it might be a sign that a support or resistance level has been reached, and that a trend is about to reverse. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for GE is 33.55%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 13.26%, tells a different story, and suggests that GE currently trades in oversold territory.

What do the trading volumes reveal?

Volume patterns can also be useful for predicting future performance. When trading activity is abnormally high, it’s often a sign that the market feels particularly strong in one way or another about the future direction of a stock. General Electric Company (GE) average trading volume of 120,721,672 during the past month is 96.33% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.



What do the analysts think?

GE is currently undervalued by -22.33% relative to the average 1-year price target of $19.08 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.70, which implies that analysts are generally neutral in their outlook for GE over the next year.

How risky is the stock?

When predicting the future performance for a stock, it’s also important to take into account risk. To do this, analysts often use a stock’s beta, which measures the stock’s volatility relative to the overall market.

General Electric Company (NYSE:GE) has a beta of 0.95, compared to a beta of 1 for the market, which implies that the stock’s price movements are less extreme than the market as a whole. GE therefore has an below average level of market risk. During the past couple of weeks, GE average daily volatility was 37.64%, which is -5.12 percentage points higher than the average volatility over the past 100 days.




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