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How to Trade General Electric Stock in Wake of GE Capital News

NEW YORK (TheStreet ) -- Shares of General Electric (GE ) are rocketing higher Friday and are on track to test a key multiyear high following news the conglomerate is planning to sell off most of its finance unit, GE Capital, by 2018.

The stock was up $2.19, or 8.5%, at $27.92 midmorning Friday. Earlier, in premarket trading, it surged 9.7% to $28.22, topping its multiyear intraday high of $28.09 set on Dec. 31, 2013.

Technical analysis suggests investors should consider reducing their positions in GE as the stock nears that multiyear high.

GE will begin shedding its GE Capital unit by selling its real estate division to Blackstone (BX ) and Wells Fargo (WFC ) for $26.5 billion. Moody's Investor Service downgraded GE's senior unsecured debt rating to A1 from Aa3 following the news.

Jim Cramer's charitable trust Action Alerts PLUS owns Wells Fargo and recently reaffirmed his faith in the stock. Read his analysis of the GE Capital news and what it means for Wells Fargo here .

On March 3 there were reports that CEO Jeffery Immelt might step down. but Friday's news shows he remains in control.

Now let's take a fresh look at the daily and weekly charts for General Electric.

Keep in mind that many strategists consider GE to be one of the 2015 "Dogs of the Dow. " The stock declined 9.8% in 2014 and then had a dividend yield of 3.5%. These are characteristics of a cheap component of the Dow Jones Industrial Average .

Investors not familiar with technical analysis should begin with the

notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.

Here's how to read a daily chart. There are two moving averages to follow. The 50-day simple moving average is in blue while the 200-day simple moving average is in green.

Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2009 when the current bull market for stocks began. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading of less than 20.00 is oversold and a reading of more than 80.00 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.

Here's the daily chart for General Electric:

Courtesy of MetaStock Xenith

General Electric had a price gap open of $27.13 on Friday, up from Thursday's close of $25.73. The stock set a multiyear intraday high of $28.22 on Dec. 31, 2013. The stock ended Thursday above its 50-day and 200-day simple moving averages of $25.10 and $25.52, respectively, which is a positive setup following Friday's stock-moving news.

Category: Forex

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