Lg-Cap Portfolio Entering General Electric (GE)

Friday confirmed the Monthly close for October. While the recent market volatility has left many Daily/Weekly charts wide and messy, the Monthly charts help smooth that noise a bit and are reflecting some substantial breakouts for the market to rally behind.

+Entering GE

It appears that the Monthly chart for GE is breaking out above a 15-year downtrend. This breakout comes after a ~500% rally off the '09 lows. However the stock has gone nowhere since 2014, consolidating the large gains in an orderly manner. 

Zooming in on the same chart, you can also see that this month the stock broke above its 61.8 retracement from the '07 decline. Often when this resistance level is overcome the stock tends to drift toward the prior high and 100% retracement of the decline. 

A strong risk/reward equation is in play here as we place our stops for this setup just below the 50% retracement level, in this case at $24. The trade effectively risks 12% (distance from breakout to the 50% retracement) to gain 38% (distance from breakout to the 100% retracement and prior high). That's better than a 3-1 ratio and I'll take that trade every time. 

Our indicators also suggest a positive pattern for prolonged upside from here. Two big spikes in buying volume have appeared in the last 6-months showing accumulation of the stock. The Monthly MACD line has pulled back to the Zero support area and is turning higher. Also Relative Strength vs $SPY broke above a multi-year downtrend. 

We like to own stocks coming into favor after a prolonged base formation. GE has the look of a successful entry here for longer-term holders. 

Our current Lg-Cap holdings are GE, COST, LMT, FB, GOOGL, Short AXP