Shares of General Electric Co. took another beating Wednesday, as selling on the back of Chief Executive Larry Culp’s downbeat cash flow outlook persisted for a second day to wipe out all the gains made from the deal to sell the biopharma business.
The selloff kept prices in a position of technical limbo, sandwiched between closely watched short-term and long-term trend trackers, for the longest stretch since the stock started bouncing off the financial-crisis bottom.
GE shares GE, -7.89% tumbled 7.9% to close at a 5-week low, and enough to pace the industrial sector’s losers. Trading volume swelled to about 205.8 million shares, making the stock the most actively traded on major U.S. exchanges.
On Tuesday, the shares had slumped 4.7% after the company said at the J.P. Morgan Aviation, Transportation & Industrials conference that it faced “significant know headwinds to 2019 cash flow,” with CEO Culp indicating it would be negative.
The stock has now lost everything it gained, and then some, following last week’s announcement that it was selling its biopharma business to Danaher Corp. DHR, -0.57% for $21.4 billion, and Culp’s pledge to return the company to its former glory.
Don’t miss: GE stock surges after $21 billion deal with Danaher, but not enough to clear key chart level.
“We disagree with the view that the it’s ‘not that bad,’ while ‘cutting numbers, reiterating buy’ is fairly common for the sell side, we reject this approach of cut and push to the next year,” which has been going on for years for some other analysts, wrote analyst Stephen Tusa at J.P. Morgan. “Unlike prior episodes that were based on next year, this seems to stretch into 2021, a whole new level. As long as this sentiment prevails, we don’t think the stock can bottom.”
Tusa was the analyst that helped mark the stock’s bottom in December, after the longtime bear upgraded GE to neutral from underweight, and removed it from his Analyst Focus list as a short idea, citing a more balanced risk-reward scenario.
Meanwhile, CFRA analyst Jim Corridore said he’s not surprised by Culp’s negative cash flow outlook given persistent weakness at GE’s power division, which he expects to last into 2020. Nevertheless, Corridore reiterated his buy rating, saying he thinks “the company is moving in the right direction,” as cash generated from asset sales “should alleviate concerns about liquidity issues.”
GE’s stock has run up 25.2% year to date, while the SPDR Industrial Select Sector exchange-traded fund XLI, -0.94% has advanced 16.2% and the Dow Jones Industrial Average DJIA, -0.52% has climbed 10.1%. But over the past 12 months, the stock has plunged 34.7%, the industrial ETF has slipped 2.0% and the Dow has gained 3.5%.
GE’s stock pullback technically started on Feb. 27 when the stock hit a wall at the 200-day moving average (DMA), which many chart watchers view as a dividing line between longer-term uptrends and downtrends. The stock closed at $10.88 that day, just shy of the 200-DMA at $10.8838, according to FactSet.
The stock has now closed below the 200-DMA for 534 straight sessions through Wednesday, the longest such stretch since data is available on FactSet going back to January 1972.
FactSet, MarketWatch
But the stock has also held above the 50-day moving average (DMA), which many use as a guide to shorter-term trends, since Jan. 4, 2019. The 50-DMA extended to $8.9715 on Wednesday, according to FactSet.
See also: GE’s stock rockets to biggest gain in 10 years as CEO Culp embraces reality over hope.
That means GE has so far closed above its 50-DMA, but below its 200-DMA, for 41 consecutive trading days, the longest such streak since it was stuck there for 51 straight days, ending June 16, 2009.
FactSet, MarketWatch
That previous long-period of technical limbo started April 2, or four weeks after the stock bottomed at a more than 16-year low of $6.40 on March 5. The current period of limbo began 3 ½-weeks after it bottomed at a 9 ½-year low of $6.45 on Dec. 12.