GE Posts Best Month Ever, But Market Analyst Says Chart Looks ‘Questionable'

Aly Song | Reuters

General Electric starts a new month with an impressive rally behind it.

The stock closed out November with its best monthly gain ever, rising by nearly 40%.

Barclays became even more bullish on the name on Monday, naming it one of its top stocks and betting on an improvement in free cash flow next year.

Ari Wald, head of technical analysis at Oppenheimer, says the latest move is more positive than negative as it lifted the stock firmly above its 50-day and 200-day moving averages. However, it is still well below a mid-2016 peak.  

"That long-term structure, it's just very questionable. Kind of how I think about it, it's moving with this beta move. It's become such a low-priced stock there's some beta to it. At this point, for it to continue to work, I think it's really just a pure play on a continuation of this global recovery which we do think plays out," Wald said on CNBC's "Trading Nation" on Monday.

Instead, Wald prefers to look elsewhere for better returns.

"From a risk-reward basis, if I want to play beta, I'm going to buy capital markets, I'm going to buy semiconductors, I'm going to buy capital goods, probably more mid-cap industrial rather than GE to play that. I think that those areas offer a much more attractive risk-reward," said Wald.

Quint Tatro, president of Joule Financial, is also wary of the bounce in GE and sees better opportunity elsewhere.

"The easy money there has been made, and I wouldn't even call it 'easy money,' because who would have known when it was going to happen, but it's happened, and I think now going forward, you have to really be careful in looking at a name like this and thinking that it's just off to the races," Tatro said during the same "Trading Nation" segment.

The trouble GE faces centers around its balance sheet, he said.

"They're going to have to improve free cash flow — they are doing that, that's fine — but they're going to have to continue to sell off divisions, they're going to have to continue to have these liquidity events that are, I think, going to hinder the progress of the stock going forward," said Tatro.

Shares are down 8% so far this year, while the XLI industrial ETF has risen 8%.

Disclosure: Joule holds shares of GE in some client accounts.


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