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General Electric Co. Testing Major Support

03/16/04 11:41:51 AM
by Gary Grosschadl

General Electric (GE), one of the market's bellweather stocks, has been sliding down hard. It has now reached an important support level, will it hold?

Security:   GE (NYSE)
Position:   Hold

A day after GE broke under its 50-day EMA support, the Dow followed suit and several more down days followed. Now the stock is at a confluence of support and the action the next several days may be critical. This probable support area has three support parameters. An important Fibonacci level of 61.8% at $30.11, a 200-day EMA at $30.44, and a suggestive candle pattern. The harami cross (as depicted) is considered to be a major reversal pattern. Although they are more effective at market tops, they can also call market bottoms. As with most patterns, next day confirmation is important. A move above the cross shows a potential move back up while a close below the cross would negate the bullish implication and most likely lead to a test of $30 support.

The two lower indicators (relative strength index and stochastics) both show very oversold conditions and hint at a possible turnaround. It's usually best to have the stochastics rise above the 20 level before putting on a bullish hat.

GE plunges along with the overall indexes.
Graphic provided by:
A close below the $30 threshold would be very bearish. But a bounce in the area between $30 and $30.50 would encourage some bullish speculation. Should an upleg develop, traders should watch for a possible balk at 20-day EMA which could provide overhead resistance. This could be the failure mark as short-term traders sell into likely resistance. Failure at or near this mark could keep GE in a downward trend.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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