This post was just published on ZYX Buy Change Alert.
The following were the three reasons for buying GE:
- A reputable activist investor has a major stake in GE. This investor has a track record of forcing major corporations into making changes. Typically the stocks he invests in run up after the changes are made.
- Perhaps under pressure from this investor, GE appointed a new CEO.
- The market has run up a lot. One of the proven strategies to generate outsized risk adjusted returns in bull markets is to find laggards that have not moved up but have a catalyst to move up.
The stock has come under pressure for four reasons:
- GE has major investments in oil and gas equipment and services. Oil has fallen. GE is now grouped by many with oil stocks.
- GE bought into oil and gas equipment and services business when oil prices were much higher. Analysts are pounding the table with this fact trying to generate business for their firms.
- GE was a major player in financial services. Financial stocks have moved up strongly. However, GE sold its financial services before the big move up in financial stocks. This is creating a negative sentiment. Analysts are also pounding the table with this fact to generate business for their firms.
- An influential analyst has put a sell on GE stock with a $22 target.
Some of the things driving GE stock down are in the past. We need to look ahead to make money.
Also, the sentiment around the stock is very negative. Typically the time to buy is when everyone else is negative on a stock with good long-term prospects.
What To Do Now
Those in the stock may consider putting stops on a 10% tranche in the zone of $25.63 to $25.68 and a stop on the remaining 15% in the zone of $24.60 to $24.68.
Those not in the stock may wait for a signal on the Real Time Feed.
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