General Electric stock price was $19.80 on Thursday’s close. Q2 2012 earnings report for GE stock is announced today prior to market’s open with an EPS estimate of $0.37, a small improvement from last year’s earnings per share ($0.34). GE stock price today might retest the resistance level at $21, which is a key level not only in the daily stock graph but also at the monthly one! Technical analysis indicates a significant double top pattern in both graphs. GE stock price fell from $42.15 to $5.73 in 2008, one of the worst years for General Electric stock. GE stock has since retraced back to 2002 support level, which is now acting as a resistance one.
Did you know that General Electric was one of the 14 companies that Thomas Edison found before he died in 1931? He also developed one of the earliest practical stock ticker machines in 1869 with a printing speed of one character per second!
I don’t expect the GE stock price to be affected largely by the earnings report being announced today. I regard buying General Electric shares today a trade of a mediocre risk to reward ratio, as we don’t really know whether the stock price will breakout above the resistance level. Certainly, if a breakout occurs, the significance of such a formation is huge, given the long term importance of the specific price level. Yet the loose stop loss, which we need to set at the most recent support level at $19.30 or even at $18, will make us pray for a breakout in order to consider this investment worthwhile. Otherwise, exiting at $20.70 in the best scenario automatically corresponds with 1-1 risk-reward ratio or worse! Risking a dollar to win a dollar or less doesn’t sound like the best stock trading strategy!
So, shorting GE stock has more value? Probably. Selling at resistance levels has always been a recommended strategy, unless there’s an established uptrend. Since General Electric stock isn’t trading rather than consolidating in the daily GE stock graph between $19 and $21, there is some merit in going short. Obviously a breakout should be frightening and quickly closing the position is strongly advisable. Risking 2 dollars though for $5 or more should GE stock drops down to $14 is considered a much more promising investment by me at least. Besides, knowing the earnings report before initiating a trade would be another valuable piece of information to help you decide trading General Electric stock or not.