Calling a bottom in General Electric has been among the more painful and fruitless endeavors on Wall Street over the past decade.
With shares now touching a three-month high, many are hoping the worst is finally behind the ailing industrial giant. A top technical analyst has a simple message: Don’t hold your breath.
“The stock has moved through this $15 level, a little bit of a near-term breakout,” Ari Wald, head of technical analysis at Oppenheimer, told CNBC’s “Trading Nation” on Monday.
But to get fully get behind GE’s rebound, Wald needs to see a shift in its 200-day moving average at the minimum.
“At the least we want to see that 200-day start to turn sideways, ideally even higher,” said Wald. “So, best thing we can say is that we wouldn’t bet against it, but we’re placing our bets elsewhere.”
GE’s 200-day moving average has been in decline since April 2017, the last time its shares traded above the technical level, and has fallen 40 percent during the past year.
The options market also remains skeptical of GE’s rally, according to Dennis Davitt, partner at Harvest Volatility Management.
“People are not believing in it in the options market,” Davitt said on Monday’s “Trading Nation.” “We saw a big buyer of options, shorter-dated options, one-month options, that are expiring — the June $14 put. We’ve had big buyers of them in the marketplace.”
Put contracts increase in value as a stock declines.
GE shares rose on Monday after the company announced plans to merge its transportation business with rail equipment company Wabtec. The $11 billion deal, expected to close early next year, is the latest in GE’s efforts to winnow operations to focus on its core industrial portfolio.
Beyond these deals, Davitt says GE must tackle its balance sheet before he can warm up to the stock.
“Until I see something come out of their liabilities on the financials side, the other stuff is just noise to me and that’s kind of what the options market is saying,” he said.
GE closed out its March-ended quarter with $106.5 billion in long-term debt on its balance sheet.